- The number of orders to acquire the US Dollar increased up to 68%
- Exactly three quarters of all open positions are now short
- The 20-day SMA is the nearest support around 122.91
- Immediate resistance is at 123.01, represented by the weekly PP
- 54% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US Wholesale Inventories, US Crude Oil Inventories, Japanese PPI, Japanese BSI Manufacturing Index
This time the Buck experienced mixed performance over the day, having appreciated mostly against commodity currencies, but declining against the Yen, the Euro and the Swissie. The Greenback lost 0.77% against the Swiss Franc, followed by a 0.50% decline against the Euro and 0.36% versus the Yen, whereas gains of 0.71%, 0.64% and 0.32% were recorded against the Aussie, the Loonie and the Sterling, respectively. At the same time, the US Dollar remained relatively unchanged versus the Kiwi, adding only 0.01% against it.
US non-farm payroll growth continued to gather speed from October said, the Bureau of Labor Statistics, as the world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. The average increase in payrolls over the past three months is now 218,000, the strongest since July. In addition to that, average hourly earnings climbed 0.2% last month, in line with expectations, slowing after a big increase a month earlier. As a result, the 12-month change slid to 2.3%, closer to the trend in recent years.
The jobs report is widely considered as the most significant monthly indicator of economic health, and earlier this week Fed Chair Janet Yellen said she still wanted to see more data before making a decision about a potential rate hike at the FOMC's meeting in less than two weeks. If the Fed raises interest rates for the first time in almost a decade, it would end an unprecedented period of easy borrowing that helped boost investment and spending. Yet, 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 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."
Rather quiet Wednesday
The Japanese Core Machinery Orders showed extremely strong figure, compared to the forecast, boosting the Japanese Yen even more. There will be no other data releases to impact the Yen today, with the nearest event being the BSI Manufacturing Index, which is to set the mood for Thursday's early trade. From the US side no significant events are due today, with the only possible release to impact the markets, namely the Wholesale Inventories. The Wholesale ones show the change in the value of goods held by wholesalers in inventory. The given Inventories are forecasted to show positive to the USD data.
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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 on the edge of negating last week's gains
The USD/JPY suffered a 44-pip loss yesterday, with the immediate support cluster preventing the pair from maintaining trade lower. The Yen remains strong due to ongoing oil price slump, with buoyant fundamentals providing an extra boost. The 20-day SMA is now the closest support, but a fall towards the cluster around 122.30 is possible, as demand for safe haven currencies (such as the Yen) is higher. Meanwhile, technical studies now have a proper sense of direction, emitting bearish signals in the daily timeframe.Daily chart
The 123.00 major level and the 200-hour SMA failed to keep the pair from edging lower yesterday, which also resulted in a slight sell-off today. The USD/JPY has been falling since the beginning of the week and there are no clear signs of the trend getting reversed yet.
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 improved today, from 52 to 55%, while the long and short positions at SAXO Bank now 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
The majority of forecasts appear to be centered around the 124.50 price level. However, 54% 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 less than a fifth (17%) of the voters, whereas the second most popular choice is between 126.00 and 127.50 yen, chosen by 15% of the surveyed. The mean forecast for Mar 9 is 123.8.
Traders believe the pair will continue moving to the south, as the consensus forecast stands for 123.9– more than 100 pips above the current market price. At the same time, for the third straight week, around 60-70% of respondents are having bullish view on the pair.
According to csan86, the bears would like to defend the 123.65-123.80 price zone. "This pair is ranging on four-hour and I cannot see any price action which can increase the probability for the breakout," he said, also adding that "if the breakout happens at 125.00-125.25, there can be the next zone where the bears try to defend their positions".
On the other side of the barricade rokasltu suggests that the USD/JPY advance seems to be limited, despite economic data, which signals the Fed's rate increase is quite possible. As a result, he is not expecting big movements during this week, but still goes for a slight decline of the pair.