- The share of buy orders slid from 51 to 46%
- Almost three quarters (74%) of all positions are now short
- The weekly S2, up-trend, 20-day SMA and the monthly R1 are the nearest support around 122.10
- Immediate resistance is at 122.87, represented by the weekly PP
- 58% of the survey participants expect the US Dollar to cost more than 123 yen in three months
- Upcoming events today: FOMC Member Dudley Speech, US Existing Home Sales, Markit Manufacturing PMI
The Greenback experienced a rather sharp sell-off on Thursday, weakening against most major currencies. The heaviest loss was recorded versus the Kiwi, 1.43%, followed by a 1.18% decline against the Aussie. However, against the third commodity currency, namely the Kiwi, the Buck lost only 0.14%, whereas moderate falls were detected against the Euro, the Swissie, the Yen and the Pound.
The number of initial jobless claims in the US continued to hover near the lowest level in four decades last week as the labour market improves to reach full employment. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 271,000 for the week ended November 14, according to the Labor Department. Claims remained below the 300,000 threshold for 37 straight weeks, the longest stretch in years. The four-week moving average of claims, considered a better gauge of labour market trends as it irons out weekly volatility, increased to 3,000 to 270,750 last week, remaining close to a 42-year low. Steady demand encouraged employers to hold the line on firings as a tighter labour market makes it difficult to attract skilled workers. Employment has shown enough signs of resilience to allow Fed policy makers to consider raising rates for the first time in almost a decade.
Economists expect payrolls will surge by at least 200,000 this month, which will give the US central bank confidence to raise its short-term interest rate at the December 15-16 meeting. The labour market has remained strong despite faltering global growth. At 5%, the unemployment rate is in territory that many Fed officials see as consistent with full employment and the share of job seekers per open position is the lowest since 2007.
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."
Quiet Friday for the USD/JPY
The BoJ Monthly Report was already released and had no impact on the USD/JPY exchange rate today. There are also no further events from the US or Japan due later today, with the only fundamental thing to influence the given pair being the FOMC Member Dudley's Speech. Nevertheless, on Monday traders are likely to focus on the US Existing Home Sales and the Markit Manufacturing PMI, which will be the main drivers due to a bank holiday in Japan that day.
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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 trades flat, edges closer to the up-trend
The US currency lost over 75 pips against the Yen yesterday, caused by the FOMC meeting minutes results, in spite of the December hike possibility remaining in play. The second support barely managed to hold the losses and is now providing resistance, leaving the USD/JPY under the risk of falling again today. The closest support is now represented by the up-trend, along with the weekly S1, monthly R1 and 20-day SMA. The Greenback is unlikely to recover from such a slump today due to lack of market movers, whereas technical indicators suggest the pair might trade flat over the day.Daily chart
Although the USD/JPY edged closer to the trend-line and attempted to regain the bullish momentum, the rally might still fail. The 200-hour SMA is causing stronger resistance than anticipating, increasing the risks of the up-trend getting broken today.
Hourly chart
SWFX sentiment rather bearish; OANDA 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 53%, while the long and short positions at SAXO Bank take still take up 56% and 44% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 58% of the three-month estimates for the currency pair are above 123 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen in slightly less than a quarter (23%) of cases. However, the second most popular interval, chosen by 15% of the surveyed, was 120.00-121.50. The mean forecast for Feb 20 is now 123.90.
This time, traders are bearish on the pair, though, the percentage of those, who expect an appreciation, declined to 43%. Nonetheless, the price is forecasted to end this week at 122.8, just slightly above the weekly pivot.
On the bullish side csan86 believes that after the amazing NFP results this cross is stopped by the 123.20 resistance level and the price has been forming a flag pattern. "There is very high possibility for an upside breakout from this pattern (I am expecting 130-150 pips)," he mentioned.
At the same time, on the bearish side rokasltu suggest that "present levels of USD/JPY pair seems to be satisfying both for buyers and sellers, while the rate does not fluctuate much". "I think similar movements will take place during this week again and USD/JPY will go down slightly," he added.