- The number of buy commands also edged higher, from 56 to 60%
- Nearly three quarters (74%) of all positions are long (previously 71%)
- 20-day SMA represents resistance around 120.18
- Support is around 119.75 (weekly and monthly PPs)
- 60% of traders see the Dollar higher than 120 yen on Jan 5
- Upcoming events today: US Markit Services PMI, US ISM Non-Manufacturing PMI, US Labor Market Conditions Index
The a lot worse-than-anticipated US Non-Farm Payrolls data caused the US Dollar to suffer heavy losses against most major peers. The USD/CAD went down 0.87%, while the NZD/USD climbed up 0.71%. The Greenback sustained a rather moderate loss, compared to other ones, against the Swiss Franc, falling down 0.58%; however, the Buck remained relatively unchanged against the Japanese Yen, edging down 0.02%.
The US economy posted another month of weak job growth in September, raising new doubts the economy may not be strong enough for the Federal Reserve to raise interest rates by the end of this year. According to the Labour Department, payrolls outside the farming industry added 142,000 last month and August growth figures were revised sharply lower to only 136,000, instead of the initially reported 173,000. July's increase the US hiring was also revised down to 223,000 from the previously reported 245,000. Generally, over the past three months, payrolls grew just 167,000, which is the weakest print since the period of December 2013 to February 2014. Meanwhile, the unemployment rate remained at a seven-year low of 5.1% in the ninth month of the year after falling from 5.2% in August.
Meanwhile, orders for goods produced by American factories tanked by 1.7% in August, following just a slight rise of 0.2% in the preceding month. Analysts estimated a decline of 0.9%. It was the steepest slide since December of the previous year, when orders dipped by 3.7%. A drop was led by falling demand for commercial airplanes and weakness the specific category, which measures business investment spending.
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 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 ISM Non-Manufacturing PMI and Markit Services PMI
From the US side attention should be paid to the ISM Non-Manufacturing PMI and Markit Services PMI. Both of these indexes are forecasted to worsen, thus putting more pressure on the Greenback after the Non-Farm Payrolls data on Friday. However, the broadly stronger US Dollar could still post gains against the Yen, with no relevant fundamental data from Japan today.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY stuck between the monthly PP and 20-day SMA
Even though the weak US fundamentals caused the USD/JPY to drop close to the monthly S1 at 118.53, the pair managed to recover most of the losses by day's end. Ultimately, the US Dollar remained unchanged against the Yen, losing only six pips, but remaining muted on Monday. The Greenback opened slightly above the monthly PP, which is providing strong support with the help of the weekly PP and the Bollinger band. Nevertheless, technical studies retain their bearish signs, implying that the Buck is to decline again.Daily chart
The US Dollar managed to break away from the 120.00 major level with the help of an extremely weak reading of the Non-Farm Payrolls on Friday. The trend-line was pierced; however, the Buck managed to retrace most of its steps and returned to the 120.00 psychological level, therefore, remaining in the up-trend.
Hourly chart
Bulls preserve majority
OANDA and SAXO Bank also report minor preponderance of bullish market participants. In the first case the longs take up 60% of the market (63% previously). In the second case 69% of open positions are long, up from 62% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
60% of traders see the Dollar higher than 120 yen on Jan 5
The average Dukascopy website visitor expects the US Dollar to cost almost 2 yen more in three months' time. Almost a one fifth of survey participants (19%) estimates that the Greenback will be worth between 121.50 and 123 yen by mid-January. At the same time, it is worth mentioning that 57% of the forecasts are above 121.50 and 60% of the given forecasts are set above the level of 120 yen.