- The share of buy orders slid from 65 to 62%.
- Nearly three quarters (74%) of all positions are short
- The weekly PP and the 20-day SMA are the nearest support around 122.95
- Immediate support is around 123.65, represented by the Bollinger band and the weekly R1
- 55% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US Labor Market Conditions, US Consumer Credit, Japanese Current Account, Japanese Final GDP
The US Dollar appreciated against most major peers on Friday, boosted by a strong reading of the Non-Farm Payrolls figures. The Buck gained the most against the Euro and the Yen, adding 0.53% and 0.41%, respectively. The Greenback also remained relatively unchanged against the Loonie and the Aussie, advancing 0.05% and 0.04% against them, respectively; however, a 0.87% loss was registered versus the Kiwi.
US non-farm payroll growth continued to gather speed from October said, the Bureau of Labor Statistics, as the world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. The average increase in payrolls over the past three months is now 218,000, the strongest since July. In addition to that, average hourly earnings climbed 0.2% last month, in line with expectations, slowing after a big increase a month earlier. As a result, the 12-month change slid to 2.3%, closer to the trend in recent years.
The jobs report is widely considered as the most significant monthly indicator of economic health, and earlier this week Fed Chair Janet Yellen said she still wanted to see more data before making a decision about a potential rate hike at the FOMC's meeting in less than two weeks. If the Fed raises interest rates for the first time in almost a decade, it would end an unprecedented period of easy borrowing that helped boost investment and spending. Yet, Yellen reiterated that interest-rate hikes will be slow and gradual in the months ahead due to sluggish growth overseas as well as divergent monetary policies between the US and other nations.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
Concerning the GDP growth, the BMI Research analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
US Consumer Credit
The aftermath of BoJ Kuroda's speech today (which weakened the Yen) leaves us with the US Consumer Credit - the only relevant data release to influence the USD/JPY. The Consumer Credit is released by the Board of Governors of the Federal Reserve and is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. The Labor Market Conditions Index is also released today, but it tends to have no effect on the exchange rates, as the data used in calculating the index was released previously. The Consumer Credit, however, is forecasted to worsen and could help the Yen somewhat recover from intraday losses.
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Raig Erlam, senior currency analyst at OANDA, reckons that this week's FOMC statement will be "the Fed's last opportunity to convince the market that rates are still on course to be raise this year". In case they exclude this message from the statement, then "they are not going to raise rates this year and we are probably looking more towards the middle of the next year".
USD/JPY to erase last week's losses
The Greenback overperformed on Friday, as it breached the immediate resistance in face of the 20-day SMA and returned above the major level of 123.00. Today the USD/JPY is supported by the weekly PP and the 20-day SMA, which together should prevent the pair from falling back under 123.00. The nearest resistance is represented by the Bollinger band and the weekly R1 around 123.60, which should later cause the US Dollar to bounce back in order to prolong the consolidation trend between 122.20 and 123.75.Daily chart
The USD/JPY almost managed to recover from Thursday's slump, but the breach of the 200-hour SMA slowed down the rally. Nevertheless, the Buck keeps climbing today, aiming to recover from last week's losses completely. The top floor remains the Nov high at 123.75.
Hourly chart
SWFX sentiment strongly bearish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker worsened today, but remains bullish at 56% (down from 59%), while the long and short positions at SAXO Bank now take up 52% and 48% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, 55% of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by slightly less than a fifth (18%) of the voters, whereas the second most popular choices are divided between the 126.00-127.50 interval, chosen by 13% of the surveyed, whereas another 13% of the voters believe the USD will cost less than 117 yen in three months. The mean forecast for Mar 4 is 123.82.