- The share of buy orders fell to 43%
- Only 42% of all open positions are long
- The Bollinger band at 117.92 is the nearest resistance
- Immediate support is around 117.60, represented by monthly S2 and the up-trend
- 55% of the survey participants expect the US Dollar to cost less than 123.00 yen in three months
- Upcoming events today: US Non-Farm Payrolls, US Unemployment Rate, US Average Hourly Earnings
Due to a higher number of US Jobless Claims the Greenback experienced mixed performance. The US Dollar lost the most against the Swissie, the Euro and the Yen, losing 1.41%, 1.38% and 0.68%, respectively. At the same time, the Buck added 0.85% versus the Aussie, followed by a 0.28% gain against the Loonie and 0.19% against the Kiwi. The US currency, however, added only 0.08% versus the British Pound.
The number of Americans applying for unemployment benefits dropped last week from a more than five-month high, indicating the labour market remains solid even as economic growth is likely to have slowed sharply in the final quarter of 2015. Initial claims for jobless benefits fell 10,000 to a seasonally adjusted 277,000 for the week ended January 22, according to the Labor Department. The drop partially offset a surge in claims of 20,000 in the preceding week to their highest level since July. Many economists argued that spike was caused by seasonal volatility around holiday employment. The four-week moving average of claims declined to 275,750 last week, down from 277,000 a week prior. It was the 44st consecutive week that claims remained below the 300,000 mark, which is associated with a healthy labour market. Some economists are concerned that low claims figures may suggest a lack of dynamism in the labour market.
The Labor Department is due to release its monthly employment report later in the day. Economists predict employers likely added 200,000 workers last month. The ADP report showed private-sector created 257,000 jobs in December, the strongest gain since December 2014.
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".
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 Payrolls
The US labour market data is due later today and is the most important event today. No changes in the Unemployment Rate and the Average Hourly earnings are expected, whereas the number of people on the payrolls of all non-agricultural business is forecasted to fall. However, we the result might exceed expectations to the upside, as the ADP data suggested on Wednesday.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 rebounds, as market turmoil fades
The USD/JPY approached the up-trend on Thursday, but was unable to maintain trade below it, as the monthly S2 was providing additional support. For the first time this week there has been a rebound in Asian stocks, which contributed to the JPY weakness, allowing the US Dollar to take the upper hand and regain the bullish momentum after confirming the support trend-line. Gains could well extend beyond the monthly S1 at 118.93, unless the US fundamentals have a negative impact on the pair and erase intraday gains. The three-year up-trend is expected to remain intact.Daily chart
In spite of a breach of the support trend-line on Thursday, the US Dollar was able to regain the bullish momentum and begin appreciating versus the Japanese Yen. Gains have been put on hold, as the US labour market data is awaited to decide further direction.
Hourly chart
Bears dominate the market
OANDA and SAXO Bank are similar in the share of their long and short positions. The portion of bulls in the market of the Canadian-based broker improved, as 69% of their traders hold long positions, compared to 66% on Thursday; meanwhile, the long and short positions at SAXO Bank now take up 63% and 37% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 123 yen
According to the survey conducted between Dec 08 and Jan 08, the US Dollar is expected to cost 120.41 yen in three months. However, according to the most popular price interval, the US Dollar is likely to cost between 114.00 and 115.50 yen after three months; this price interval was selected by 36% of the voters. The second choice was higher, as 18% of the voters chose the 123.00-124.50 interval. Meanwhile, the majority of 55% believe that the Greenback is to fall below 123.00 yen after a three month period.
This week sentiment among Dukascopy traders has absolutely changed, as now 85% of traders predict the Yen to gain in value. Alongside, the average forecast for the end of the week is placed around the 121.1 level.
The US Dollar is to outperform the Japanese Yen, as most traders suggest. Among these traders Likerty believes the USD/JPY has not finished its bullish development yet before turning for med-term bearish correction towards 100.xx mark.
According to agddivisas, a trader with the Dukascopy Community, the USD/JPY pair can continue falling without any limitation. "I suppose, the target is 118 level," he said.