- Buy orders take up 57% of the market
- Traders remain equally divided between bulls and bears
- Immediate resistance lies at 114.75
- The closest support rests around 113.50
- Upcoming events: US Building Permits, Philadelphia Fed Manufacturing Index, US Initial Jobless Claims, US Housing Starts, US Crude Oil Inventories
More expensive gasoline and rental accommodation boosted US consumer inflation last month, official figures showed on Wednesday. The Department of Labour reported its Consumer Price Index advanced 0.3% month-over-month in December, following the previous month's 0.2% gain. On a yearly basis, the headline CPI climbed 2.1%, the largest annual increase since June 2014, after rising 1.7% in November. Both readings came in line with analysts' expectations. Meanwhile, core consumer prices remained unchanged in December from the prior month, climbing 0.2%. Year-over-year, the core CPI grew 2.2%, compared to November's 2.1% rise. However, the Fed's preferred inflation measure, the core PCE, remained below the Central bank's 2% target at 1.6% in December. Last month's acceleration of headline inflation was mainly driven by higher prices of gasoline and rental accommodation that jumped 3.0% and 0.3%, respectively.
Separately, the Federal Reserve said industrial production rose 0.8% last month, compared to November's downwardly revised fall of 0.7%. The figure came in line with economists' projections. The Utilities Index contributed most to the December increase, posting a 6.6% monthly rise. The Capacity Utilization Rate climbed 0.6% to 75.5% from November's downwardly revised 74.9%.
US Building Permits and Philly Fed Manufacturing Index
On Thursday there are some important evets from the US side, but the main event is still due on Friday, Trump's inauguration. Today, however, traders can focus on the US Building Permits, as they show the number of permits for new construction projects. It implies the movement of corporate investment (US economic development). It tends to cause some volatility to the USD. Another event will be the Philadelphia Fed Manufacturing Survey. It is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index.USD/JPY on the edge of breaking its three-week down-trend
Fed Yellen's comments on Wednesday provided the US Dollar with a strong boost, which allowed the USD/JPY to erase both Monday's and Tuesday's losses. The pair now faces its three week down-trend, which, technically, could provide sufficient resistance for a U-turn, not to mention the trend-line being bolstered by the weekly PP. Technical studies also support this outlook, but the Greenback could still retain its strength from Janet Yellen's speech, which would result in the down-trend losing its credibility. The next target would then be the 116.10 level, where the 20-day SMA coincides with the monthly PP.Daily chart
The USD/JPY currency pair attempted to recover from previous losses, but the 200-hour SMA appears to have provided sufficient resistance in order to prevent that from happening. Although the bearish momentum could prevail today, the down-trend's breach is anticipated to occur tomorrow.
Hourly chart
Market sentiment remains in perfect equilibrium for the third consecutive day, but the number of purchase orders lost 13 percentage points over the day. The orders now take up 57% of the market.
Right now 51% of OANDA clients are bears, compared to 49% on Wednesday. In the meantime, Saxo Bank clients remain on the bullish side, being that 53% of their open positions are now long and the remaining 47% 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 19 and January 19, traders expect the US Dollar to appreciate to 118.89 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.