- 55% of all open positions are currently short
- The number of buy orders slid from 55 to 54%
- The nearest resistance is located at 104.66
- The closest support rests around 104.85
- Upcoming events: US Core PCE Price Index, US Personal Spending and Income, Chicago PMI
The US economy expanded at its fastest pace since 2014 in the Q3 of 2016 amid higher exports and a rise in inventory investment, official data revealed on Friday. According to the US Department of Commerce, the economy grew 2.9% in the Q3, following the preceding quarter's 1.4% growth and surpassing the 2.5% pick up market forecast. It was the strongest expansion since the Q3 of 2014. However, the stronger than expected figures are unlikely to influence the Federal Reserve's views, as it is more focused on employment and inflation. US exports jumped 10% in the Q3, the largest increase since the Q4 of 2013, contributing 0.83% to GDP growth. The Q3 rise in exports was led by soybeans and analysts suggest that the momentum could be lost in the Q4. Inventory accumulation by businesses increased $12.6 billion in the reported quarter, contributing 0.61% to GDP growth.
Investment in non-residential structures advanced 5.4% in the Q3, the biggest gain since the Q2 of 2014, compared to the prior quarter's 2.1% drop. Meanwhile, business spending on equipment declined 2.7%, falling for the fourth consecutive month. Separately, the Labor Department said the Employment Cost Index remained unchanged at 0.6% in the Q3, in line with analysts' expectations.
US data in focus today
Today attention should be paid to the US fundamentals, namely the US side the Core Personal PCE Price Index, which is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditures. It is a significant indicator of inflation. At the same time the Personal Spending and Income are due. The Spending measures purchases of goods and services by households and by non-profit institutions, that serve households from private business. The Income, however, measures the total income received by individuals, from all sources including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation. Finally, the Chicago PMI will be released. It captures business conditions across Illinois, Indiana and Michigan. This Index is an indicator of business trends and it is interrelated with the ISM Manufacturing Index. It is widely used to indicate the overall economic condition in the US.USD/JPY to preserve the up-trend
In spite of a strong US GDP reading on Friday, the American Dollar still weakened against the Japanese Yen, putting the five-week up-trend to the test. Today the USD/JPY currency pair opened with a small bearish gap, but the bullish momentum is expected to prevail, pushing the exchange rate back above the trend-line. Technical indicators are also in favour of the positive outcome, as their signals changed from mixed to bullish over the weekend. However, the 105.00 level is expected to be the ceiling today, with the Bollinger band providing resistance slightly higher at 105.11.Daily chart
A sharp decline on Friday caused the USD/JPY currency pair to reach the lower boundary of an ascending channel pattern, where the Buck found support eventually. According to the hourly chart the US Dollar is likely to keep appreciating against the Yen, once again moving towards the channel's upper trend-line.
Hourly chart
Traders' sentiment is even more bearish than on Friday, being that 55% of all open positions are currently short (previously 52%). Meanwhile, the number of buy orders slid from 55 to 54%.
Meanwhile, there has been an increase in the number of long positions at other brokers. Right now 55% of OANDA clients are bulls, compared to 51% on Friday. Meanwhile, Saxo Bank clients are slightly more bullish than on Friday, being that the portion of longs now takes up 53% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between September 31 and October 31, traders expect the US Dollar to appreciate to 105.80 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 81% of all forecasts fall above 102 yen, which is close to the current spot price. By far the most popular interval is 108.00-109.50, chosen by 18% of all the surveyed, compared to popularity of the 105.00-106.50, 106.50-108.00 and 109.50-111.00 intervals.