- The share of purchase orders now takes up 74% of the market
- Exactly three quarters of traders are short the Buck
- The monthly R2 and Bollinger band imply a ceiling at 123.60
- Immediate support is around 122.00, represented by the weekly PP, monthly R1 and 100-day SMA
- More than three quarters of the surveyed expect the rate to stay above 120 yen in three months
- Upcoming events today: US Retail and Core Retail Sales, US PPI and Core PPI, US Preliminary UoM Consumer Sentiment and Inflation Expectations, US Business Inventories
The Greenback suffered losses against most major peers, despite a rather strong reading of US JOLTS Job Openings. The US Dollar lost the most versus the Aussie, 0.90%, followed by a 0.64% decline against the Euro and 0.45% versus the Swiss Franc. The Buck also gained against the Kiwi and the Loonie, adding 0.23% and 0.22%, respectively, while remaining relatively unchanged against the Sterling, losing 0.12%.
Fed officials supported a possible December interest rate hike with one key policy maker saying the risk of waiting too long was now in balance with the risk of moving too soon to raise rates. With a rate hike this year now seen as very likely, the focus is shifting towards the pace of lifts. St. Louis Fed President James Bullard said that the pace would depend on the state of the world's number one economy and should not be seen as a steady path higher. Bullard believed growth would be strong, and the jobless rate should slip into the 4% range. At the same time, a key ally of Fed Chair Janet Yellen, New York President William Dudley, said that he saw the pace of tightening to be quite gradual. With regards to the US inflation, consumer price growth was predicted to accelerate to 1.5%, from 1.3%, as pressures related to the strong Greenback and low energy prices subside, Fed Vice Chair Stanley Fischer said. The US Dollar has gained about 15% since mid-2015 as the Fed was preparing markets for a rate hike, other major central banks added stimulus, and as investors crowded into US-denominated assets in the face of slowdowns elsewhere.
Meanwhile, US jobless claims remained unchanged last week at a seasonally adjusted 276,000, according to the Labor Department.
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 Retail and Core Retail Sales
No further events concerning the Japanese economy are scheduled for today, therefore, attention should be paid to the US fundamentals. The most important events are the Retail and Core Retail Sales. The Retail Sales are released by the US Census Bureau and measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales exclude automobile sales, also being the "advance" report, which can be revised fairly significantly after the final numbers are calculated. Both of the given events are forecasted to improve, but the PPI (YoY) – to worsen, which might act as a counterweight if all data meets expectations. The MoM PPI, however, is likely to show strong figures as well, boosting the US currency.
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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 awaits US data before leaving 122.60
The USD/JPY extended its correction for another day, despite distinctly bullish technical studies, which mostly proved to be unreliable this week. Nonetheless, the Greenback might still end the correction, rebounding towards the immediate resistance cluster, namely the monthly R1 and the Bollinger band around 123.60. At the same time, a rather large group of potential supports lie just beneath the spot price, ranging all the way to the 121.00 major level. Any of these levels could limit the losses in case those occur.Daily chart
The pair has been sliding down through all of the week, with a possibility of extending the losses today – bouncing back from around 122.90. The 200-hour SMA is the only support nearby, which might still cause a rebound and push the USD/JPY to 123.60, namely the November high.
Hourly chart
SWFX sentiment deteriorating; OANDA and SAXO Bank traders remain bullish
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 improved to 55%, while the long and short positions at SAXO Bank take up 53% and 47% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than three quarters expect the rate to stay above 120 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 76% of the three-month estimates for the currency pair are above 120 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen in exactly a quarter (25%) of cases. However, the second most popular interval, chosen by 16% of the surveyed, was 120.00-121.50. The mean forecast for Feb 13 is 122.79.
Compared to the previous week, traders' opinions changed significantly. Today close to 90% of them are bullish, expecting the US Dollar to outperform the Japanese Yen by the end of the week.
One of the traders amongst the bulls, a member with a rather strange community nickname, consisting of only three question marks, commented that "the USD/JPY have broken 121.75% level as well as the trend-line." He, therefore, believes the market will surely go upside and touch the 124.43 level.
Among the remaining 12.5% of bearish traders, Daniil_Stolnikov, said that the resistance did not manage to reach the 123.33 level, hence he is expecting a bearish development.