- There are 56% of orders to buy the Greenback
- 56% of traders are short the USD today
- The monthly S1 and the Bollinger band around 120.90 are the nearest support
- Immediate resistance is around 121.60, represented by the weekly PP, 55, 100 and 200-day SMAs
- 51% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US CPI and Core CPI, Empire State Manufacturing Index
The Buck experienced mixed performance on Monday, having appreciated against some major peers and declined against the others. The Greenback declined mostly against commodity currencies: 0.74% against the Aussie, 0.60% versus the Kiwi and 0.16% against the Loonie. Gains of 0.56% and 0.27% were registered against the Sterling and the Swissie, respectively. At the same time, the US currency remained relatively unchanged against the Yen (0.02%) and the Euro (-0.02%).
Americans increased their spending in November, signalling enough momentum in the world's number one economy for the Fed to hike rates as soon as this week for the first time in almost a decade. According to the Commerce Department, retail sales excluding automobiles, gasoline, building materials and food services climbed 0.6% following an unrevised 0.2% growth in October. The core retail sales correspond most closely with the consumer spending component of GDP. Overall retail sales climbed 0.2% last month as automobile sales declined, while cheaper gasoline affected receipts at service stations. Auto sales fell 0.4% in November, the biggest decrease since June, after dropping 0.3% in October. At the same time, receipts at service stations declined 0.8% following a 1.0% slide in October.
A separate report showed, US producer prices for final demand climbed 0.3% in November, the biggest increase in five months. In the twelve month through November, wholesale dropped 1.1%, compared with a 1.6% decrease in October. Fed policy makers are expected to hike interest rates at their meeting this week for the first time in nearly a decade, resting on a much-improved labour market but without strong evidence inflation is firming.
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 CPI and Core CPI are the main events today
The most important economic data releases today are the inflation reports, namely the US CPI and Core CPI. The Consumer Price Index is released by the US Bureau of Labor Statistics and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The difference between the CPI and the Core CPI is that the Core one excludes food and energy, when calculating price change of goods and services purchased by consumers.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 on the verge of falling to Nov low
The US Dollar dropped to a fresh five-week low yesterday, but managed to partially recover from that slump, closing trade above the immediate support. Even though the monthly R1 is now bolstered by the Bollinger band, technical studies insist the USD/JPY is to edge even lower. Losses are unlikely to extend beyond the November low of 120.25. Meanwhile, a strong cluster, represented by the weekly PP, 55, 100 and 200-day SMAs, is to limit any volatility to the upside.Daily chart
The USD/JPY extended its bearish trend for another day yesterday. This week the Buck appears to be glued to the 121.00 major level, edging closer to the down-trend. This resistance line is expected to keep the Greenback from advancing for another day today, until the FOMC Minutes tomorrow.
Hourly chart
SWFX sentiment edging closer to equilibrium
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 slightly worsened today, from 65 to 64%; while the long and short positions at SAXO Bank now take up 60% and 40% 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, a half 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 choice is between 126.00 and 127.50 yen, chosen by 13% of the surveyed. The mean forecast for Mar 15 is 123.15.