- The share of buy orders slid from 56 to 48%
- 58% of all open positions are short
- Immediate resistance lies t 104.66
- The closest support rests around 104.00
- Upcoming events: US ADP Non-Farm Employment Change, US Crude Oil Inventories, Federal Funds Rate, FOMC Statement
US manufacturing activity grew for the second consecutive month in October, official data showed on Tuesday. The Institute for Supply Management said its Manufacturing Purchasing Managers' Index jumped to 51.9 points in October, following the preceding month's reading of 51.5 and surpassing the 51.8 market forecast. The October growth was mainly driven by a rise in production and hiring. Any reading above the 50 point level 50 indicates an expansion in the manufacturing sector, which accounts for about 12% of the US economy.
Meanwhile, the Production Index rose 1.8% to 54.6 points, while the New Orders Index dropped to 52.1 from the previous month's 55.1 and the Employment Index increased 3.2% to 52.9 during the reported period. The Export Orders Index rose slightly to 52.5 from the prior month's figure of 52. Analysts widely expect manufacturing activity to pick up in the Q4. The US manufacturing sector was hit by the strong US Dollar between June 2014 and December 2015, as the appreciation of the Greenback hampered US exports. The Federal Reserve began a two-day policy meeting on Tuesday and it is unlikely to raise interest rates at this meeting ahead of the presidential election on November 8. However, analysts widely anticipate a December rate hike.
US fundamentals remain the main drivers
Attention falls to US data once again today, such as the ADP Non-Farm Employment Change. It is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. The ADP data provides an early look to the actual employment change data, which is usually released two days later. The most important event, however, will be the FOMC statement and with it, the Federal Funds Rate decision. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. In the US the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC statement, and whether the tone is hawkish or dovish, over future developments of inflation.USD/JPY under selling pressure amid political uncertainty
Once again the USD/JPY pair failed to reclaim the 105.00 level, which resulted in a rather sharp decline of 66 pips yesterday. Downside volatility on Tuesday was limited by strong demand around 104.00, formed by the weekly S1, monthly PP and 20-day SMA, which are also providing strong support today. Technical studies keep giving bullish signals, but it is uncertain whether the Buck will be able to outperform the Yen. The bottom level today is the 103.40 one, namely the area that kept the pair elevated during the past three weeks. At the same time, hawkish FOMC statement today could cause the Greenback to negate yesterday's losses and approach the 105.00 mark once again.Daily chart
An unexpected spark of USD selling caused the ascending channel pattern to be broken to the downside yesterday, with the pair falling close to last week's low. Bears appear to be prevailing today as well, pushing the Greenback even lower, with the next target being the 103.17 level, namely the three-week low.
Hourly chart
Bears keep gaining numbers, as 58% of all open positions are short today (previously 57%). The share of buy orders slid from 56 to 48%.
Meanwhile, there has been a decrease in the number of long positions at other brokers. Right now 53% of OANDA clients are bulls, compared to 54% on Tuesday. In the meantime, Saxo Bank clients are as bullish as on Tuesday, being that the portion of longs still takes up 54% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between October 02 and November 02, traders expect the US Dollar to appreciate to 105.63 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 76% of all forecasts fall above 102 yen, which is close to the current spot price. By far the most popular intervals are the 105.00-106.50 and the 108.00-109.50 ones, both chosen by 18% of all the surveyed, compared to popularity of the 103.50-105.00, 106.50-108.00 and 109.50-111.00 intervals.