- The number of purchase orders dropped from 68 to 65%
- Bearish market sentiment remains unchanged at 71%
- The weekly PP and the 20-day SMA are the nearest resistance around 122.83
- Immediate support is around 122.30, represented by the monthly PP, weekly S1 and the Bollinger band
- 58% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance
The greenback sustained losses against most major peers in wake of the ECB's statement on Thursday. The largest losses were registered against the Euro (2.96%) and the Swissie (2.46%), with another moderate decline of 1.27% versus the Sterling. Nonetheless, the US Dollar managed to appreciate against the Canadian Dollar, but only adding 0.09%.
Fed Chairwoman Janet Yellen reiterated that interest-rate hikes will be slow and gradual in the months ahead due to sluggish growth overseas as well as divergent monetary policies between the US and other nations. In her testimony for Congress' Joint Economic Committee, Yellen said that the Fed is ready to lift rates at the central bank's policy meeting this month as the domestic economy continues to strengthen. However, global setting is giving the Fed pause about acting aggressively beyond that. Yellen also added that the market is close to the Fed's goal of full employment and that drags on inflation will fade next year. Her comments came less than two weeks before the FOMC meets to decide on whether to raise interest rates for the first time in almost a decade. Fed officials hold their next policy meeting December 15-16. They are widely expected to raise short-term interest rates by a quarter-percentage point, from near zero, where they've been since December 2008.
Meanwhile, the Institute for Supply Management non-manufacturing PMI showed the US economy excluding manufacturing lost some momentum in November. The gauge declined to 55.9 in November from 59.1 a month earlier.
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 Non-Farm Employment Change
All focus is set on the US Non-Farm Employment Change data – the last set of labor market data before the interest rate hike decision later this month. The Non-Farm Payrolls are released by the US Department of Labor and present the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile. A rather gradual decline is expected, compared to the previous upbeat figure, but the payrolls could still beat expectations today. However, the US Average Hourly Earnings (due at the same time) are forecasted to fall, whereas the Unemployment Rate to remain unchanged. This secondary data could put more pressure on the US currency, but should be outweighed by any better-than-expected Payrolls number.
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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 muted in anticipation of Payrolls data
The US Dollar's losses slightly exceeded expectations, as the pair stabilised at 122.59, rather than in front of the weekly PP at 122.74. Nevertheless, the USD/JPY is now facing a rather strong support cluster around 122.30, represented by the monthly PP, the weekly S1 and the Bollinger band. The pair's exchange rate still has a 20-pip space to edge down, or even breach the immediate support cluster in case the Payrolls data disappoints too much; but the base case scenario is a rally towards the 20-day SMA and a possible retest of the weekly R1 at 123.22.Daily chart
The harsh decline caused the one-week up-trend to get pierced yesterday, despite the 200-hour SMA providing additional support. Today, however, the given SMA is acting as a resistance and could trigger another sell-off. In case the 200-hour SMA gives in, gains might extend slightly above the 123.00 major level.
Hourly chart
SWFX sentiment strongly bearish
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 returned to its Wednesday's level of 59% (up from 58%), while the long and short positions at SAXO Bank now take up 54% and 46% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, 58% of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by slightly more than a fifth (21%) of the voters, whereas the second most popular interval was 126.00-127.50, chosen by 13% of the surveyed. The mean forecast for Mar 4 is 124.01.
Traders are getting less optimistic about the pair, as the proportion of optimists slipped to 64% this week from almost 75% a week earlier.
Panzer, a member of the Dukascopy Community, suggests that the USD has a strong upward trend against all currencies in your shopping cart. However, "due to some problems lately in some regions of the world, resort to resort. Yen again gets the label of refuge, so the USD/JPY is currently balanced in a narrow range, due to the falling EUR/JPY and GBP/JPY," he commented.
Jignesh believes the US Dollar is to weaken against the Japanese Yen by the end of this week. He backed his view with the following comment: "The USD/JPY is still not able to clear the overhead resistance that has come in the form of a down trendline. Downside pressure will be on the pair again this week, as it's struggling in this area for a few weeks now."