- 70% of all pending orders are to purchase the US Dollar
- Traders remain equally divided between bulls and bears
- Immediate resistance lies at 113.50
- The closest support rests at 111.50
- Upcoming events: US CPI and Core CPI, US Capacity Utilization Rate, US Industrial Production, US Beige Book, Fed Chair Yellen's Speech
Manufacturing activity in the State of New York dropped more than expected in January, results of the latest The Empire State Manufacturing Survey showed on Tuesday. The New York Federal Reserve reported factory activity across the region fell to 6.5 points from December's 9.0 points, while market analysts anticipated a slight decrease to 8.1 in January. However, any reading above the 0 point-level points to expansion in the manufacturing sector. The General Business Conditions Index declined slightly to 6.5 from 7.6 registered in December, remaining in the expansionary territory for the third straight month.
Meanwhile, the New Orders Index dropped to 3.1, following the preceding month's 10.1 points, whereas the Shipments Index remained unchanged at 7.3, pointing to robust shipment growth. In addition, the Delivery Time Index and the Unfilled Orders Index advanced to -2.5 and -1.7 in January, respectively. The Inventories Index jumped 16 points to 2.5, indicating the first increase in inventory level since the middle of 2015. The Future Business Conditions Index held steady at 49.7 in January, after rising sharply in in the wake of Trump's victory in the US presidential election. The Prices Paid Index surged 14 points to 36.1, reaching its highest level since 2014 and pointing to increasing inflation.
US Inflation data and Yellen's speech in focus
Today the most important fundamental events are from the US side, namely the CPI and Core CPI figures. The US CPI is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. In Core CPI those volatile products such as food and energy are excluded in order to capture an accurate calculation. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Another important data release will be the Industrial Production, which shows the volume of production of US industries, such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rate to rise. The Beige Book is also relatively important, as it reports on the current US economic situation. Through interviews with key business contracts, economists, market experts, and other sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. Nevertheless, the Fed Chair's Speech today is likely to cause the most volatility if something extremely relevant will be said today.USD/JPY attempts to negate Tuesday's losses
With risk-aversion driving the markets yesterday, the USD/JPY currency pair ignored the immediate demand cluster and dropped below the 113.00 mark. Technical indicators keep giving bearish signals in the daily timeframe, but the nearest resistance area is now unlikely to be capable of preventing the Buck from edging higher. As a result, there is nothing holding the US Dollar from rising or falling today, meaning that fundamental events are likely to provide impetus. The Greenback has the potential to reclaim the 114.00 mark and erase yesterday's losses, but downside risks remain, with the weekly S2 at 111.50 being the closest support.Daily chart
At the moment the 112.60 level is the bottom floor, but it is yet uncertain whether the USD/JPY currency pair will be able to fully recover. The 23.60% Fibo could still provide resistance and keep the Buck from crossing the 114.00 threshold, ultimately sending it below 113.00 again.
Hourly chart
Traders remain equally divided between bulls and bears, while 70% of all pending orders are to purchase the US Dollar (previously 69%).
Right now 51% of OANDA clients are bulls, compared to 49% on Tuesday. In the meantime, Saxo Bank clients remain on the bullish side, being that 56% of their open positions are now long and the remaining 44% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between December 18 and January 18, traders expect the US Dollar to appreciate to 118.92 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 60% of all forecasts fall above 117 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 123.00 and 124.50 yen in three months, with 17% of the survey participants choosing this trading range. At the same time, the second most popular intervals were the 111.00-112.50 and the 124.50-126.00 ones, with 14% of survey participants choosing them.