- The portion of orders to acquire the US currency dropped five percentage points to 52%
- The share of bulls returned to its last Friday's level of 61%
- 20-day SMA represents resistance at 120.18
- Support is at 119.99 (weekly PP and up-trend)
- 69% of traders see the Dollar higher than 120 yen on Dec 25
- Upcoming events today: US Core Personal Consumption Expenditures, US Final GDP, US Personal Consumption Expenditures Prices, US Markit Services PMI, US Revised UoM Consumer Sentiment
The Greenback sustained losses against most major currencies, amid poor Core Durable Goods Orders data results. As a result, the NZD/USD currency pair edged 1.25% higher, while moderate losses of 0.44% and 0.41% were detected versus the Swissie and the Euro, respectively. Meanwhile, the Cable remained completely unchanged.
The number of Americans seeking unemployment benefits rose slightly in the week to September 19, but remains consistent with a labour market that is steadily adding jobs. Initial jobless claims across the US advanced by 3,000 to a seasonally adjusted 267,000 in the reported period, while markets expected an increase to 272,000 claims. Meanwhile, another bunch of data from the US revealed that factories in the world's largest economy saw the first decline in orders for durable goods in three months. Orders for big-ticket items fell 2% in August, following the downwardly revised gain of 1.9% in the prior month. Bookings for core capital goods edged 0.2% lower on a monthly basis in August, missing the estimate for 0.4% rise.
Meanwhile, Chairwoman of the Federal Reserve Janet Yellen spoke yesterday in Massachusetts. She admitted that the majority of FOMC members are favouring an increase of the Federal Funds rate this year. However, any unexpected economic events may change that plan, she added. In addition to that, Yellen underlined that recent financial and economic developments, especially in China, might damp outlook for economic recovery and inflation. It was the main reason, why the Fed left rates on hold a week ago.
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".
Concerning the GDP growth, the 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 Final GDP and Markit Services PMI
The US Bureau of Economic analysis is to release the Final GDP figures today, however, as this is the final release, the impact is expected to be not as significant as the Advance release would have had. Although the data is expected to fall in line with expectations, a shift in either direction should cause the US Dollar behave accordingly. Another rather significant data release is the Services PMI, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. With the forecast standing at 55.60 (down from 56.10), there is a slight chance of the GDP showing a worse-than-expected figure as well.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY to jump to last week's high
Despite rather strong volatility to the downside yesterday, the USD/JPY still managed to remain within the triangle pattern and edged closer to the 120.00 major level. The US Dollar is expected to regain the bullish momentum today and break out of the pattern accordingly, after having been pinned down to the 120.00 level for two weeks. Any further Greenback's attempts to appreciate should be limited around 121.00, where the 200-day SMA coincides with the monthly PP and weekly R1.Daily chart
The USD/JPY repeated its movements and rebounded after dropping lower over the day. The pair even managed to pierce the 200-hour SMA at the end of the day, which allowed the Greenback to climb higher and attempt to break out of the triangle pattern. However, the game might still change after the fundamental data are released.
Hourly chart
Bulls preserve majority
OANDA and SAXO Bank also report minor preponderance of bullish market participants. In the first case the longs take up 57% of the market, unchanged since yesterday. In the second case 62% of open positions are long, up from Thursday's level of 60%.
Spreads (avg, pip) / Trading volume / Volatility
69% of traders see the Dollar higher than 120 yen on Dec 25
The average Dukascopy website visitor expects the US Dollar to cost almost 2 yen more in three months' time. Slightly less than a fifth of survey participants (19%) estimates that the Greenback will be worth between 121.50 and 123 yen by the mid-December. At the same time, it is worth mentioning that 50% of the forecasts are above 121.50 and 69% of the given forecasts are set above the level of 120 yen.
The survey among Dukascopy Community members shows that traders are still undecided over the pair's future perspectives, votes are divided almost equally.
On the one side of the barricade we have khalidamassi, a member of the Dukascopy Community, who believes the USD/JPY moved in the last three weeks in range between 119 and 121. "This range may continue next week, any break of upper range may send the pair towards 122, but any clear break below 199 may send the pair sharply lower towards 116 level", he commented. On the other side, massimoscales suggests that the given pair is depending a lot on any release from China, which will be the main driver.