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Forex Analysis – USDJPY
According to a preliminary report released today by Japan’s Ministry of Economy, Trade, and Industry, retail sales in November 2021 rose 1.9% YoY, much higher than 0.9% in October and up for the second month in a row. ¥48.25 billion worth of goods were sold in November, an increase of 9.1% compared to November 2020. Market expectations for the latest reading were 1.7%, as consumers increased their spending on goods and services after a drop in COVID-19 cases and a spike in vaccinations. Retail sales rose 1.2% month over month for the 3rd consecutive month.
The economic calendar is quiet today but there will be some Japanese unemployment data out this afternoon, with expectations of November’s unemployment rate coming in at 2.7% and the same as the previous month.
The yen is trading with mixed relative strength at the London open today but is generally weakening against its peers. The US dollar index is still trading within its range that formed in the last week of trading in November but still looks bullish while it trades above $95.465. The USDJPY is rising as the DXY keeps its head above the $96 price level this morning and the yen weakens against the euro and greenback.
Oil prices and the US 10-year yields have been falling as rising cases of Omicron have impacted the airline industry, especially in America. Around 2400 flights were cancelled over the holiday period due to crews being grounded because of the latest outbreak of COVID-19. Brent crude has dropped from $76 per barrel to trade nearer to $75.50 and the US 10-year yields have come down from the Decembers highs of 1.68% to now trade at 1.40%. The USDJPY had been moving higher in tandem with the rising price of oil and US benchmark rates but over the last few weeks, the USDJPY has begun to peel higher as the other two economic measures drift lower.
The ActivTrader sentiment indicator shows that the retail traders on the platform are heavily shorting the USDJPY which makes for a good contrarian bullish setup. The price action on 26th November saw the USDJPY print a lower swing low, which may be the driving force for these bearish traders to keep holding the short positions. If this is the case their stops are likely to be above the recent highs of 115.54.
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The 20 and 50-period Donchian channels on the daily time frame are not confirming a bullish breakout is currently likely to happen today but price is above the 50-period midline which is now acting as support at 114.020.
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Intraday the H1 USDJPY chart is showing the 20 and 50-period Donchian channels are lining up for a bullish breakout above 114.51. The markets are going to be quiet this week as we’re in the middle of bank holidays across the world of finance. With London closed the forex markets may not move much today and the spreads will probably widen due to the lack of liquidity.
