- SWFX market sentiment is 70% bullish (-2%)
- 62% of pending orders in the 100-pip range are set to BUY
- US Dollar breaches 200-hour SMA
- Upcoming events: FOMC Members Dudley and Williams to speak, BoJ Bank Lending y/y, Japan's current account
The US Dollar suddenly decline against the Japanese Yen and broke the previously drawn ascending channel. The reason is simple. Everything is consistent with the massive sell off occurring in the equity markets. The currency exchange rates are set to continue to bounce, as their demand and supply changes as equities are being sold and bought. One can either take advantage of these fluctuations or stay out.
Economic activity in the US services sector was the strongest in more than 12 years, supported by rising new orders, suggesting that the economy sustained the strong momentum in the beginning of the year. The ISM survey showed that its non-manufacturing PMI jumped to 59.9 in January, from 55.9 in the prior month.
The US economy kept expanding even before the stimulus from a $1.5T tax cut program has begun to filter through. However, that is likely to cause some concerns that the country's economy could overheat.
No releases, watch equity markets
This trading session is expected to be relatively calm. The President of the Federal Reserve Bank of New York William Dudley will speak about banking culture at a joint Thomson Reuters / the European American Chamber of Commerce event at 1330GMT; while his counterpart in San Francisco John Williams is due to speak at a community leaders luncheon at 2230GMT.
Meanwhile, the Bank of Japan will release data on Bank Lending for the month of January, as well as the country's Current Account for December at 2350GMT.
USD/JPY falls down to 109.20
The US Dollar continued to trade in a short-term ascending channel against the Yen. The second bottom confirmation was provided early on Tuesday after which the pair accelerated towards the weekly PP at 109.70.By Wednesday morning, it had returned for a re-test of the 200-hour SMA. Technical indicators suggest that this session might mark a further decline, possibly down to the nearest support of the weekly S1 at 108.91 or the bottom channel line located nearby.
Given that no significant fundamentals are to be released today, the Greenback might spend this session within the 108.80/109.70 range. Subsequently, this currency should gain strength and breach the most junior channel drawn on the chart with dashed lines.
Hourly chart
As apparent on the chart, the rate is still trading in a narrow five-week descending channel. Given the current positioning of the pair, traders might see a soon breakout to the upside that could be followed by a short-term surge.
In terms of today's outlook, the pair was driven by strong downside momentum in the morning. The US Dollar has nevertheless remained in the same trading range between the weekly PP and S1 in the 108.90/109.70 area.
Daily chart
SWFX traders are on the long side, as 70% of open positions were bullish during the morning hours (-2%). In addition, 66% of pending orders are to buy the Greenback (-3%).
The market sentiment of OANDA traders remains strongly bullish with 65% long positions. Meanwhile, Saxo Bank clients are likewise bullish, as 59% of open positions are long (+5%).
Spreads (avg, pip) / Trading volume / Volatility