- The share of sell orders increased from 51 to 53%
- Exactly three quarters of traders are short the Buck
- The monthly R2 is the nearest resistance at 123.49
- Immediate support is at 123.30, represented by the weekly R1
- 56% of the survey participants expect the US Dollar to cost more than 123 yen in three months
- Upcoming events today: US Building Permits, US Housing Starts, US Crude Oil Inventories, FOMC Member Dudley Speech, FOMC Meeting Minutes
Due to a bad reading of the Industrial Production, the US Dollar failed to advance against the Aussie, the Loonie and the Sterling. Gains, however, were registered against the Swiss Franc (0.49%), followed by a 0.41% and 0.35% gain against the Euro and the Kiwi, respectively. The Greenback lost 0.20% against the Aussie and 0.08% versus both the Sterling and the Loonie as well.
US consumer inflation rose in October after two consecutive months of declines as the cost of gasoline and a range of other goods increased. According to the Labor Department, US consumer price index climbed 0.2% last month, reversing September's 0.2% decline. Measured on an annual basis, costs of living in the US rose 0.2% after being unchanged in September. Signs of stabilization in prices following a recent downward spiral is likely to be encouraging news for the Fed and give officials confidence that inflation will steadily move towards the central bank's 2.0% goal. Economists predict the first signs of progress sometime in the next few months, as the precipitous decline in energy prices starts to peter out of the data. The so-called core CPI, which excludes food and energy costs, gained 0.2% after a similar gain in the prior month. In the 12 months through October, the core CPI increased 1.9% after rising by the same margin in September.
The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running below the core CPI. The dollar's 18% rise against the currencies of the United States' main trading partners since June 2014 has weighed on prices of goods such as apparel and automobiles.
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".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
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 Building Permits and FOMC Meeting Minutes
With no significant events in Japan scheduled for today, the most important data release is the US Building Permits. The Building Permits are released by the US Census Bureau at the Department of Commerce and show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development) and tends to cause some volatility to the USD. However, the FOMC Meeting Minutes later today is likely to cause an even greater impact on USD crosses. This meeting reviews economic and financial conditions and determines the appropriate stance of monetary policy, assesses the risks to its long-run goals of price stability and sustainable economic growth. Any information concerning the December rate hike is expected to drive the Cable accordingly.
.
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 takes another shot at overcoming 11-week high
Although the Greenback appreciated against the Japanese Yen on Tuesday, a new 13-week high was not reached. The pair also failed at breaching the immediate resistance cluster, which could turn the tide today, leading the USD/JPY down to the weekly PP at 122.87. In case the weekly PP fails to hold the losses, a fall towards the cluster around the up-trend is expected. Nevertheless, the US currency has the potential to reach the second resistance just above the 124.00 level, namely the weekly R2 and the Bollinger band. Technical studies are bolstering the possibility of a surge with bullish signals.Daily chart
The pair reached a high of 123.50, just ten pips away from the previous week's high. Bears are expected to take over, but due to rather strong demand areas just below 123.00, the USD/JPY might ignore the 123.60 high and advance further.
Hourly chart
SWFX sentiment rather bearish; OANDA traders remain bullish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker decreased from 57% to 55%, while the long and short positions at SAXO Bank take still take up 48% and 52% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 56% of the three-month estimates for the currency pair are above 123 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen by more than a quarter (27%) of cases. However, the second most popular interval, chosen by 17% of the surveyed, was 120.00-121.50. The mean forecast for Feb 18 is 123.55.
This time, traders are bearish on the pair, though, the percentage of those, who expect an appreciation, declined to 43%. Nonetheless, the price is forecasted to end this week at 122.8, just slightly above the weekly pivot.
On the bullish side csan86 believes that after the amazing NFP results this cross is stopped by the 123.20 resistance level and the price has been forming a flag pattern. "There is very high possibility for an upside breakout from this pattern (I am expecting 130-150 pips)," he mentioned.
At the same time, on the bearish side rokasltu suggest that "present levels of USD/JPY pair seems to be satisfying both for buyers and sellers, while the rate does not fluctuate much". "I think similar movements will take place during this week again and USD/JPY will go down slightly," he added.