- 58% of all commands are to sell the Buck
- There are now 73% of traders being short the US Dollar
- The monthly R2 and Bollinger band imply a ceiling at 123.45
- Immediate support is around 122.00, represented by the weekly PP, monthly R1 and 100-day SMA
- Almost three quarters of the surveyed expect the rate to stay above 120 yen in three months
- Upcoming events today: US Import Prices, US WholeSale Inventories, FOMC Member Evans Speech
The post-NFP hype has ended, leaving the US Dollar in the red zone on Monday. The only exception was the USD/JPY, which remained relatively unchanged and climbed 0.04% higher. A significant 0.44% loss was recorded against the British Pound, followed by a 0.18% decline against the Swissie. The Buck also remained mostly unchanged against the Euro and Aussie, losing 0.05% and 0.01%, respectively.
US job growth accelerated at a much faster pace than expected in October following two consecutive months of tepid gains, setting the stage for the December rate hike. Nonfarm payrolls surged 271,000 last month, the biggest increase since December 2014, according to the Labor Department. The number was well above economists expectations of 182,000 new jobs. Payrolls data for August and September were revised to show 12,000 more jobs added than previously reported. The strong rebound in payroll creation in October lifted the three-month average to 187,000. The US unemployment rate declined to 5.0%, the lowest level in more than seven years.
The employment report joined October's robust services sector and auto sales data in reinforcing views that economic growth will regain steam in the fourth quarter after slowing down sharply to a 1.5% annual pace in the July-September period. The services sector added 241,000 jobs in October, with large gains in retail, health and leisure. Fed policy makers will see one more employment report released in December, about two weeks prior to their final meeting this year. However, given the strong rebound in payrolls in October, few rate setters should doubt that the economy's readiness for a rate hike.
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."
Another quiet day
Apart from the Fed official Evans scheduled to speak today, Tuesday is similar to Monday in terms of fundamental events. The only significant data release is the US Import Prices, which shows the change in price of imported goods and services in the domestic market. This release is considered important because it is basically the earliest inflation data the government releases. Another possible event to consider is the Wholesale Inventories, but it tends to have little or no impact on the USD crosses at all.
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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 remains at multi-year highs
The Buck kept hovering over the 123.00 major level, as the Bollinger band and the monthly R2 prevented the USD/JPY from leaving the tight range. However, the two levels are now forming a single resistance around 123.45, hence, risks of edging lower are higher. Nonetheless, technical indicators retain their bullish signals, suggesting the pair could overcome the immediate resistance. At the same time, the nearest support lies only around the 122.00 mark, but an event to weigh the Greenback down that much is absent today; therefore, the base case scenario is a fall to 122.80.Daily chart
The trend-line on the hourly chart is still intact and unless the US Dollar closes under the 123.00 major level in the next two days, the up-trend then will most likely be preserved. Contrariwise, a breach of the 123.00 mark could trigger a decline towards the 200-hour SMA around 121.55.
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 remained unchanged at 54% over the day, while the long and short positions at SAXO Bank broke out of the equilibrium, with bulls outnumbering the bears by four percentage points.
Spreads (avg, pip) / Trading volume / Volatility
More than two thirds 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, 74% 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 a quarter (25%) of cases. However, the second most popular interval, chosen by 18% of the surveyed, was 120.00-121.50. The mean forecast for Feb 10 is 122.25.