- 69% of positions are long
- USD/JPY forms short-term channel
- 200-hour SMA at 102.40 acts as resistance
- Pair is prone to falling to 101.40
- Upcoming events: US Retail Sales, PPI, Unemployment Claims, Manufacturing Index
US import prices dropped unexpectedly last month amid lower petroleum and food prices, official data revealed on Wednesday. According to the Department of Labor, import prices fell 0.2% on a monthly basis in August, compared to the preceding month's unrevised gain of 0.1%, whereas market analysts penciled in a decline of 0.1% in the reported month. Moreover, that was the first monthly fall since February. Lower oil prices as well as the strong US dollar put downward pressure on the price of imports last month. August's decline in import prices was led by a monthly fall in the cost of imported communications equipment, which dropped 1.0%.
On the positive side, the price of imports from Japan jumped 0.3% in the reported month, posting the largest increase since August 2011. The cost of imported petroleum fell 2.8% in August, following the previous month's decrease of 3.6%. Excluding petroleum, import prices remained unchanged after rising 0.5% in July. Other data released by the US Energy Information Administration on the same day showed that crude oil inventories fell 0.6 million barrels in the week ended September 9, following the 14.5 million barrel drop seen in the previous seven days and surpassing the 2.8 million barrel gain forecast.
Look forward to loads of US releases
There are no important releases from Japan scheduled for today, but there should be more than enough of events in the afternoon. The US retails are expected to shrink 0.1%, which is not much of a change compared to the previous reading of zero. At the same time, among many other releases we will receive data on the number of unemployment claims, producer prices and manufacturing sector, and for the time being the effect seems impossible to estimate, as the expectations are mixed - some indicators (PPI, Current Account, etc.) are to improve, while the others (Manufacturing Index, Unemployment Claims, etc.) are to deteriorate.USD/JPY dives back under 102.70
USD/JPY fetched 103.40 yesterday, but eventually slid back under 102.70, which is represented by the weekly PP and 55-day SMA. The current support is at 102.16/03 (monthly PP and 20-day SMA), but the pair is unlikely to stay in this narrow corridor for long, considering the amount of high-impact events scheduled for today. We are still waiting for the price to break one of the two key levels, which is expected to determine further direction of the pair. The key resistance is at 103.50 and the key support is at 100 yen.Daily chart
After probing the trendline the currency pair fell 120 pips and closed beneath the 200-hour SMA, and in the near term this implies an extension of the sell-off to 101.40 - the trendline that was established in the second half of August.
Hourly chart
Judging by positioning in the SWFX market (69% are long), a majority of traders is waiting for a rally. However, this also means that the US Dollar is already overbought, and there is little room for new buyers to enter the market and push the price higher.
There has been a significant drop in the share of longs at OANDA - minus six percentage points, though the sentiment remains bullish, as 60% of positions are still long. As for the situation at Saxo Bank, clients of the Denmark-based broker increased their bullish bets, and bulls now take up 65% of the market rather than 63% as 24 hours ago.
Spreads (avg, pip) / Trading volume / Volatility
Two thirds of traders forecast stronger Dollar
Traders are generally bullish on USD/JPY. Considering that the currency pair is currently trading circa 102 yen, two thirds of them expect the US Dollar to become more expensive in three months, and the rest expect the Greenback to become cheaper. The average forecast for December 8 is 103.88, while the most likely price interval is considered to be 108.00-109.50, which was chosen by 17% of the surveyed.