- Pending orders in 100-pip range from the current market price are strongly positive (73% bullish / 27% bearish)
- The pair will likely increase in price, with the closest resistance at 119.38
- The downward movement is still possible, but should be limited by the weekly S1 and monthly PP at 116.91/75
US wholesale prices were pushed down by declining gas and food costs in November, adding to signs that cheaper oil worldwide is curbing inflationary pressures. Producer price index dropped 0.2% in November, after climbing by the same amount a month earlier,according to the Labor Department. However, a core measure of producer inflation, which excludes food, energy and trade services, was flat. Measured on an annual basis, the core index climbed just 1.5%, and the annual gauge has been falling a tenth of a point each month since September. The PPI is a forerunner to the more crucial CPI data that will be released on Wednesday. Economists forecast consumer prices in the world's number one economy remained subdued in November, sliding to the negative territory after last month's zero growth.
Meanwhile, With the Japanese economy struggling to recover after the April's sales tax hike but no obvious contenders proposing a more effective fiscal strategy, voters backed up Prime Minister Shinzo Abe's Liberal Democratic Party on Sunday to proceed with reforms known as Abenomics. In Sunday's snap election, the conservative Liberal Democrats, which have ruled for most of the post-World War II era, was reported to gain a solid majority of at least 291 seats. Abe called the snap elections last month even though his approval ratings were faltering due to several scandals and data that confirmed that the Japanese economy had officially fell into recession.
US data to drive the currency, after Japan's election
Japan's election have ended and no major data are expected from the nation today; however, its trade balance will be released in the night from Tuesday to Wednesday. Today we are going to see a several medium importance news from US - Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production and NAHB Housing Market Index. All of them are expected to increase from the previous release, thus a negative surprise could hurt the US Dollar.
USD/JPY hovers around 119
At the first half of the year USD/JPY was trading almost completely flat, as it traded around the 102 level. However, at the second part of August the Greenback started to outperform the Japanese peer rather heavily. Recently, the pair breached the 120 mark and for the time being it remains a target for the pair's bulls since the Greenback has slipped below it. Nonetheless, if traders' fail to breach this substantial level then it is likely to trade around 118/119 levels.Daily chart
For the recent days the pair has been fluctuating around the 118/119 levels and seems well-supported by the 118 level. And even though the technical indicators are slightly more to the upside, the pair is not showing its bullish determination. We expect the USD/JPY cross to continue to trade around the 118 level, with a potential of testing the psychological level at 120.
Hourly chart
Open positions stay neutral, pending orders improve
Concerning the orders placed 100 pips from the spot, there are significantly more commands to buy, namely 73%. It implies that, if USD/JPY rebounds, in the near-term it may be stopped by the weekly PP and possibly it could push the pair lower.
However, if the pair continue to retreat, most likely it will be stopped by the weekly S1 and monthly PP 116.91/75.
Spreads (avg,pip) / Trading volume / Volatility
Community expects Yen to retreat
Aslamhammad, one of the community members participating in the survey, anticipates the pair to slide slightly lower by stating "I expect USD/JPY to slightly trade lower on this upcoming Friday, as the USD is overvalued against the Yen,and I think we should see a correction soon."
Meanwhile, traders, who were asked regarding their longer-term views on USD/JPY between Nov 11 and Dec 11 expect, on average, to see the currency pair at 121.20 by the mid-March. However, the largest portion of participants, namely 15% of them, believe the exchange rate will gain either to 121.50/123.00 or 124.50/126.00 in sixty days. Only 25% expect the USD/JPY cross to slide below the current market value.