- No significant difference between the bulls (52%) and the bears (48%)
- 76% of pending orders are to buy the Dollar (only 55% on Friday)
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- Upcoming events: Japanese Retail Trade and Industrial Production
Japan's annualized core inflation cooled for a fourth consecutive month in November due to falling oil prices, underscoring challenges the Bank of Japan faces in reaching the 2% inflation goal. Factory production unexpectedly dropped, while real wages posted the sharpest decline in five years. The core consumer price index, which strips out volatile fresh food but includes oil products, climbed 2.7% in November from the previous year. Excluding the effects of a sales tax increase in April, core consumer inflation was 0.7%, falling from 0.9% in October and far below the BoJ's 2% target. Industrial production declined 0.6%, however, manufacturers expect output to increase 3.2% in December and rise 5.7% in the beginning of 2015.
The BoJ Governor Haruhiko Kuroda said that recent drops in oil prices would be beneficial for the Japanese economy and would help to accelerate inflation in the long term. Kuroda underlined that while oil price declines weigh on overall prices in the short term, they will help to boost corporate profits and allow companies to increase wages. On top of that, minutes of the November meeting of the BoJ showed that board members urged the government to "steadily promote measures aimed at establishing a sustainable fiscal structure."
Retail trade growth in Japan to subside
USD/JPY is still likely to be dominated by the data from Japan. While in the USA there are only low-importance releases scheduled for today, the Ministry of Economy of Japan is going to publish the figure on the retail trade growth, which is expected to decelerate from 1.4 to 1.1%. At the same time, the industrial production should grow at 0.8% instead of 0.4%.
USD/JPY intends to challenge 121 once again
Although the US Dollar came under a strong selling pressure after hitting the resistance at 121, the currency has not yet fallen beneath 120. Accordingly, there is a high chance USD/JPY will soon re-challenge the weekly and monthly R1 levels. In case of success the pair will be expected to extend the rally beyond the current 2014 high —to the 124-125 region. In case of failure we might see a test of the up-trend at 118.Daily chart
After escaping the boundaries of the bullish channel on the hourly chart, USD/JPY keeps trading between 120 and 120.50. If the price were to fall, there is a dense demand zone around 119.50 (200-hour SMA). Conversely, if the bulls seize control of the pair, there will encounter difficulties as soon as the rate comes into contact with 121.84.
Hourly chart
SWFX market stays undecided
But while the SWFX market participants are undecided, the sentiment is distinctly bullish according to the SAXO Bank (66% of positions long) as well as according to OANDA (61%).