- Percentage of buy commands keeps decreasing, from 68% recorded last week it fell to 60%
- The SWFX sentiment returned to being neutral — 55% of open positions are long
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: Japan Current Account, FOMC Member Lockhart Speech
Unemployment in the world number one economy ticked lower in December, opening the door wider to an interest rate hike from the Fed this year despite a sluggish global economic growth. Thus, the US marked the best year for hiring in 15 years with a robust job gain in December and the unemployment rate falling to the lowest level in six years. According to the Labor Department, US employers added 252,000 jobs in December, pushing the jobless rate to 5.6% down from 5.8%. Job gains were broad-based, with private payrolls surging 240,000 and US government employment increasing 12,000. November's non-farm payroll data was revised upwards to show 353,000 jobs were created. December marked the 11th consecutive month of payroll rise above 200,000, the longest stretch since 1994. Yet wage growth remains subdued and some economists expect the Fed to be hesitant to pull the trigger on lifting interest rates without a significant growth in labor costs. Average hourly pay dropped 5 cents. Moreover, the jobless rate fell partly due to the fact that many of the unemployed gave up looking for work, as the labour force participation rate dropped to 62.7% from 62.9% in November.
The solid job gains added to strong third-quarter growth data, as well as solid November industrial output and retail sales reports, in suggesting the US economy would withstand turbulence in Europe, Japan, China and some emerging markets.
Risks decreased until Wednesday
Neither Monday nor Tuesday are likely to contribute to the volatility of USD currency pairs, as there are no important release scheduled on both days. Japan's Current Account number may have a significant impact on USD/JPY, though it may be delayed until the beginning of the European trading session. On the other hand, Wednesday will be marked by the US retail sales growth figure, import prices and business imventories.
USD/JPY retreats to 118
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Nicholas Ebisch from Caxton FX shares a similar view, anticipating moderate appreciation of the US Dollar against the Yen over the next 12 months. He forecasts the currency pair to go up to 122 in a month, subsequently reaching a target of 125 by April. According to the analyst, by the end of 2015 the rate may well achieve the level of 135, on the condition the US macroeconomic indicators do not fall behind the expectations and the Japanese officials introduce more easing measures to promt up inflation.
Daily chart
Yet again USD/JPY failed to sustain a recovery, but this time already in the vicinity of 120 rather than near the December highs at 121. Nonetheless, the pair is well-supported at 118, where the 55-day SMA merges with the 23.6% retracement of the Oct-Dec rally, meaning there are likely to be even more attempts to breach the nearby supports and finally surpass the 2014 high at 122 without violation of the key supports.
Hourly chart
Sentiment neutral
The SWFX sentiment returned to being neutral with respect to the US Dollar — 55% of open positions are long (57% on Friday). OANDA clients seems to have a bullish view regarding the US Dollar - as many as 63% of them are currently holding long positions. Even more positive attitude is observed as SAXO Bank, where 74% of open positions are long.
Meanwhile, the percentage of buy commands keeps decreasing, from 68% recorded last week it fell to 60%, signifying the demand for the buck is waning.