- The share of sell orders surged from 32 to 69%
- 71% of all open positions are long
- The nearest support is at 111.78, namely the monthly S3
- Major supply area is seen at 113.89 yen
- 55% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US CPI and Core CPI, Japanese Flash Manufacturing PMI, US Flash Manufacturing PMI
As oil prices declined later on Thursday, the US Dollar was able to outperform the commodity currencies, namely the Aussie and the Loonie. The Greenback added 0.40% against both of them, while a smaller rally of 0.18% was registered against the Euro, whereas the USD/CHF remained relatively unchanged (0.05% higher). The Buck, however, also sustained rather serious losses, such as 0.75% against the safe haven Yen and 0.34% against the British Pound. The third commodity currency also managed to inch higher against the US Dollar – the NZD/USD climbed up 0.16%.
The number of Americans applying for unemployment benefits unexpectedly declined last week, reinforcing the view the labour market continued to strengthen. Initial claims for state unemployment benefits decreased 7,000 to a seasonally adjusted 262,000 for the week ended Feb. 13, the lowest level since November, according to the Labor Department. The previous week's claims were unrevised. The four-week moving average of claims, which irons out week-to-week volatility, dropped by 8,000 to 273,250 last week. Claims have now been below the 300,000 threshold, which is associated with a healthy labour market, for 50 consecutive weeks - the longest stretch since the early 1970s. The gauge declined 12,000 between the January and February survey periods, suggesting a pick-up in job growth. At the same time, nonfarm payrolls rose by 151,000 in January.
The health of the jobs market could determine whether the Fed hikes rates this year. How quick these lifts will come, though, will depend on how fast inflation pressures are able to bounce back after being kept at bay by cheap oil and lower costs of imports. Bets for a March rate hike have largely been eliminated due to tightening financial market conditions and concerns about the domestic and global economies.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US inflation seen weary
There are no economic data releases concerning the Japanese economy today. From the US side, the inflation figures are due. The Consumer Price Index is released by the US Bureau of Labor Statistcsis, and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI, however, excludes Food & Energy. At the same time, the Core CPI is expected to grow, thus, strengthening the US currency, while the normal CPI is to show no signs of improvements.USD/JPY trades in murky waters
Same as yesterday, the appeal for safe havens, such as the Japanese Yen, is relatively high. On Thursday the USD/JPY currency pair broke through a rather strong support area, leaving the door open for a decline towards the 112.00 mark. This major level is somewhat bolstered by the monthly S3, which is located at 111.78 and should contribute to limiting the possible intraday losses. Even though daily technical indicators support this outcome, the weekly ones are no long giving bearish signals, implying that a corrective rally towards 113.88 supply area could occur.Daily chart
The USD/JPY once again entered a short-term descending channel this week. A break to the upside is unlikely, as the upper border is reinforced by the 200-hour SMA. Weak inflation figures, however, could cause the support line to get pierced and price to fall even below 112.00.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 58% of open positions are long (previously 60%), and the Danish bank reports that 59% of its clients' positions are long, compared to 58% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The majority of the survey participants (55%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price intervals, selected by 17% of the voters; however, according to the votes collected between Jan 19 and Feb 19, the mean forecast for May 19 is 118.39. At the same time, 15% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week traders' expectations divided, as now 50% of Dukascopy Community members estimate the pair to gain in value.
According to Likerty, USD/JPY has already confirmed a correction of the recent USD weakness. "The pair could go as high as to 119.50/80 again. For this week – 114.30/70 is an important area," he mentioned.
Among the other 50%, Besim 76 said that the USD/JPY pair fell during the bulk of the week, but found enough support towards the end to turn things back around. "We actually went as low as the 111 area or so, but did get a bit of a bounce. Ultimately, we do think that the market continues to go lower though, probably trying to reach the 110 level," the trader added.