- Share of commands to purchase the Buck went up from 51 to 56%
- Bullish sentiment keeps weakening, the portion of longs is at 59%,
- Dramatic change in the share of bullish market participants at SAXO Bank, from 48 to 78%
- Fingraphs.com: USD/JPY to trade in the 123-125 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: US ISM Manufacturing PMI, Personal Spending, Price Index
The world's number once economy slowed its growth pace in the final quarter of the year, even despite the solid hiring and falling gasoline prices. The main drag came from exports as US top trading partners have been struggling to grow recently. The Commerce Department reported that the US gross domestic product, the broadest measure of goods and services produced across the economy, rose at a 2.6% annual rate in the fourth quarter. The economy grew 5% in the third quarter and 4.6% in the second quarter after slowing down in the first three months of the year. Lower energy prices, along with a improving labour market, helped boost consumer spending last quarter and most economists forecast these tailwinds to underpin the US economy in 2015. The slowdown in the December quarter was largely due to the deteriorating growth overseas as Japan slipped into yet another recession, Europe is on the verge of another slump and struggling with deflation and China's years of double-digit growth remained in the past. Export growth to those countries continued to slow as it rose at a 2.8% rate, compared with the third quarter's 4.5% pace.
For 2014 as a whole, GDP expanded 2.4%, only slightly better than the average 2.2% growth of 2010-2013, a moderate pace compared to prior growth periods. During the 1990s the economy grew an average 3.4% a year.
Slower growth in the US manufacturing industry
While, the production in Japan is growing at a stable pace, as evidenced by the reading of 52.2, following 52.1 posted a month earlier, the rate of the sector's expansion in the United States is expected to show weaker growth than in December, 54.9 after 55.5.
USD/JPY on a weak footing
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Nicholas Ebisch from Caxton FX shares a similar view, anticipating moderate appreciation of the US Dollar against the Yen over the next 12 months. He forecasts the currency pair to go up to 122 in a month, subsequently reaching a target of 125 by April. According to the analyst, by the end of 2015 the rate may well achieve the level of 135, on the condition the US macroeconomic indicators do not fall behind the expectations and the Japanese officials introduce more easing measures to prompt up inflation.
Daily chart
USD/JPY opened the week with a large downside gap (60 pips), but it has already been closed, and thus an extension of a rally is unlikely. Yet another ‘sell' sign is a cluster of resistances at 118, which is mainly created by the weekly and monthly pivots points, among the other studies. There now may well be a sell-off down to 116.00/115.50 region, where the price should be underpinned by the 38.2% Fibo and monthly S1.
Hourly chart
Significantly more bulls at SAXO Bank
The bullish sentiment keeps weakening, as the portion of longs at the moment is at 59%, while the 10-day average is at 63%. At the same time, the share of commands to purchase the Buck went up from 51 to 56%.
The distribution between the longs and shorts at OANDA is also relatively unchanged, 61 and 39%, respectively. On the other hand, there has been a dramatic change in the share of bullish market participants at SAXO Bank, where it soared from 48 to 78%.