- Sell orders outnumber the buy ones by only 2% points
- Today 62% of traders hold short positions
- The weekly PP at 118.30 is the nearest resistance
- Immediate support is around 117.70, represented by the monthly S2 and the up-trend
- 56% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Retail and Core Retail Sales, US PPI and Core PPI, Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, FOMC Member Dudley Speech, US Preliminary UoM Consumer Sentiment
The Greenback appreciated against most major peers, with exception against the Aussie, the Swissie and the Sterling. The American Dollar edged 0.63% higher against the Kiwi, 0.32% versus the Yen and 0.18% against the Loonie. A decline of 0.40% was registered against the Aussie, while the Buck also remained relatively unchanged against the Euro, adding 0.10%, the Swiss Franc and the Sterling, losing 0.10% and 0.04%, respectively.
The number of Americans applying for unemployment benefits unexpectedly jumped last week, a sign labour market momentum may be starting to wane. Initial jobless claims rose by 7,000 to 284,000 in the week ended January 9, the second-highest level since July, according to the Labor Department. Economists, however, had predicted a decrease to 275,000. The increase likely reflects volatility rather than a change in labour market conditions, as the data is difficult to adjust during holidays. Claims also tend to increase at the start of each quarter. The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, increased 3,000 to 278,750 last week. Still, it was the 45th consecutive week that claims remained below the 300,000 mark, which is associated with strong labour market conditions. That is the longest such stretch since the early 1970s. Concerns that a slowdown in China and other emerging economies will limit prospects for US growth have shacked stock markets and may prompt some employers to cut back.
Furthermore, the number of people still receiving benefits after an initial week of aid rose 29,000 to 2.26 million in the week ended January 2. The four-week moving average of the so-called continuing claims increased 5,250 to 2.22 million.
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 PPI, US Retail and Core Retails Sales
The most important events today concern the US economy, namely the Retail and Core Retail Sales, the PPI and the Preliminary UoM Consumer Sentiment. The US Retail Sales are released by the US Census Bureau, they measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude the automobile sector. A slowdown is forecasted in both Retail and Core Retail Sales. Another important event is the Producer Price Index, which is released by the Bureau of Labor statistics, Department of Labor and it measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. A rather sharp decline is anticipated in the PPI. Furthermore, a number of secondary events could also have an impact on the USD/JPY, help it edge higher or lower.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 struggles to preserve the up-trend
A strong reading of yesterday's US Import Prices helped the USD/JPY pair to preserve the up-trend and stabilise at the highest level this week. The Buck, however, struggled to climb over the weekly PP, which acted as the immediate resistance and limited the volatility. A breakout of the current trading range is expected, with the bearish trend prevailing. Nevertheless, the immediate support in face off the up-trend and the monthly S2 around 117.70 remains strong, which in turn could even cause a rebound and a breach of the weekly PP at 118.30. Technical studies, on the other hand, retain bearish signs.Daily chart
The Greenback's efforts to appreciate higher than 118.00 were in vain, as the 200-hour SMA provided resistance and caused the USD/JPY to bounce back earlier today. Price has been falling ever since, but is expected to stop around 117.10. Consolidation between 117.10 and 118.30 is likely to last until the US fundamentals are released later today.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders hold long positions. Among SAXO Bank, 61% of traders are long the US Dollar, whereas 63% of all positions at OANDA are also long (previously 62%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 123 yen
The largest half of the survey participants (56%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 35% of the voters; however, according to the votes collected between Dec 15 and Jan 15, the mean forecast for Apr 15 is 119.2. At the same time, 13% of the surveyed believe the Greenback could fall in the 123.00-124.50 price interval after a three month period.
Compared to the previous week, the bullish sentiment significantly weakened, as now only 55% of traders expect the pair to rise, comparing to the previous 85% of bullish votes. As a result, the average median for the pair for the end of this week decreased to 117.9.
Rokasltu, a trader with the Duksacopy Community, said that at the beginning of the year the USD/JPY went down quite substantially. "I think, the USD/JPY pair has a potential to regain moderately during this week," he added.
Meanwhile, another member of the Community suggested that the Buck is to weaken versus the Japanese Yen by the end of the week. "I believe, the Dollar should weaken against the Yen, reaching the 115 level in the short term," STARLINE backed his view.