- The percentage of buy orders slipped from 70 to 64%
- The sentiment remains weakly bullish — 56% of open positions are long
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: Challenger Job Cuts, Unemployment Claims, Consumer Credit
US private companies created more jobs than expected in December, adding to signs the job market kept momentum at the end of the year, and bringing annual hiring to 2.5 million for 2014, according to payroll processor ADP. Employers added 241,000 workers, following the 227,000 increase in employment in previous month, beating economists' expectations for a 227,000 rise. December's private job creation appeared to be broad based despite concerns about downsizing at oil-related companies, which have faced a dramatic decline in crude prices to the lowest level in more than five years. The ADP data comes ahead of the Labor Department's non-farm payrolls report on Friday, which includes both public and private sector employment. Economists predict total US employment have risen by 240,000 jobs in December, down from 321,000 in the preceding month, while the jobless rate is expected to drop to 5.7% from 5.8%, which would be the lowest level since June 2008.
Separately, US trade gap narrowed in November to the lowest level in almost a year, as falling crude prices and weaker demand for foreign oil curbed the import bill, which augurs well for the fourth quarter growth data. The US trade deficit shrank 7.7%, the biggest monthly contraction in a year, hitting $39 billion in November, the lowest level in 11 months.
US Unemployment Claims to decline
The market expects the number of people seeking jobless benefits to decrease today. In the meantime, tomorrow's releases concerning the labour data in the United States may not be as positive - the Non-Farm Payrolls are forecasted to drop, while the growth of the average hourly earnings is likely to decelerate.
USD/JPY negates losses
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Nicholas Ebisch from Caxton FX shares a similar view, anticipating moderate appreciation of the US Dollar against the Yen over the next 12 months. He forecasts the currency pair to go up to 122 in a month, subsequently reaching a target of 125 by April. According to the analyst, by the end of 2015 the rate may well achieve the level of 135, on the condition the US macroeconomic indicators do not fall behind the expectations and the Japanese officials introduce more easing measures to promt up inflation.
Daily chart
USD/JPY is currently attempting to recover the recently lost ground, but the upside may well be limited by the just breached rising trend-line at 119. The resistance here is also implied by the monthly PP, weekly S1 and 20-day SMA. Accordingly, the risks are skewed to the downside. However, if the price manages to close above the supply area, despite the strong resistance, there is likely to be a re-test of last year's maximum at 122.
Hourly chart
Gap between the longs and shorts remains minimal
The SWFX sentiment with respect to the US Dollar remains weakly bullish — 56% of open positions are long. Meanwhile, according to the data provided by OANDA and SAXO Bank, the bulls have a more comfortable advantage over the bears - 24 and 32 percentage points, respectively.
As for the pending orders, the percentage of the ones to purchase the currency 100 pips from the spot slipped from 70 to 64%, meaning the buying pressure remains strong, but weakening.
Spreads (avg, pip) / Trading volume / Volatility
Most forecasts placed above 120
This week sentiment among the Dukascopy traders has slightly weakened, as now 75% of traders predict the Yen to lose value. Alongside, the average forecast for the end of the week is placed around the 120.6 level. One of the US Dollar bulls, aslamhammad, expects "USD/JPY to exchange higher, as the trend is up and the price can still go higher". He also mentions that "we have very important economic news the upcoming Friday, 9th of January 2015, the US Non- Farm Payrolls, which should be better then expected".