USD/JPY -Yen Remains Under Pressure

USD/JPY continues to remain under pressure, as it trades in the high-90 range. In Monday’s Asian session, the yen briefly pushed above the 91 line, its highest level since June 2010. Japanese CSPI declined, as inflation indicators continue to point to a deflationary trend in the economy. In the US, there are two key releases, Core Durable Goods Orders and Pending Home Sales.

The yen continues to trade at multi-year highs, and market anticipation of  further easing by the Bank of Japan continues to weigh on the Japanese currency. Is the plunging yen finally bearing fruit for the Japanese economy? The Japanese government seems to think so as it raised its forecast of economic growth, stating that the Japanese economy is expected to by 2.5 percent in the next fiscal year. The government credited the weakening yen and higher demand for Japanese exports. This is a significant revision from the previous estimate of 1.7 percent growth. At the same time, Prime Minister Abe’s pledge to increase inflation has so far not occurred. The Corporate Services Price Index is the latest inflation indicator to post a negative reading, as it declined by 0.4%. This indicates that economic activity continues to be stymied by deflation. Meanwhile, Japan’s economy minister defended his government’s stimulus program at the World Economic Forum in Davos, Switzerland. Akira Amari stated that the government did not have a deliberate policy to weaken the yen, and that it was up to the market to determine the currency’s exchange rate.

In the US, economic indicators continue to be all over the map, making it difficult to gauge the extent of the US recovery. The employment situation appears to be improving, as the Unemployment Claims indicator has looked outstanding for the past two weeks. Retail Sales also has looked sharp. On the other hand, we continue to see sluggish manufacturing and consumer sentiment data. As well, recent housing numbers have not looked sharp. On Friday, New Home Sales declined to 369 thousand, way off the estimate of 387 thousand. The US Federal Reserve has not been in the headlines lately, but is busy at work, as it increased its purchases of securities in January from $40 billion to $85 billion. This has pushed  the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. The markets will be paying close attention to the Fed’s take on the economy, when it meets for a key policy meeting later this week.

 

USD/JPY for Monday, January 28, 2013

Forex Rate Graph 28/1/13

USD/JPY January 28 at 12:45 GMT

 

USD/JPY 90.84 H: 91.19 L: 90.57

 

S3 S2 S1 R1 R2 R3
89.31 89.85 90.23 90.91 91.30 91.94

 

In Monday trading, USD/JPY continues to show volatility. The pair briefly pushed across the 91 line in the Asian session, but pulled back. The line of 90.91 is providing weak resistance, and could see further activity during the day. The next resistance line is at 91.30. On the downside, 90.23 is providing support. Given the volatility of the pair, it cannot be considered safe. The pair is receiving stronger support at 89.85.

  • Current range: 90.23 to 90.91.

 

Further levels in both directions:

  • Below: 90.23, 89.85, 89.31, 88.55, 87.95, 87.36 and 86.97
  • Above: 90.91, 91.30, 91.94 and 92.53.

 

OANDA’s Open Position Ratios

USD/JPY continues to fluctuate, but the USD/JPY ratio is quiet as we begin the new trading week. The ratio is closely split between long and sort positions, indicating a split among traders as to which direction the pair will take next. If USD/JPY continues to be active, we can expect the ratio to show some movement as well.

The yen continues to hit multi-year lows, as the pair briefly pushed above the 91 level earlier on Monday. Will the upward move continue? With two key US releases scheduled for later today, we could see futher volatility from the pair.

 

USD/JPY Fundamentals

  • 23:50 Corporate Services Price Index. Estimate -0.4%. Actual -0.5%
  • 13:30 US Core Durable Goods Orders. Estimate 0.8%
  • 13:30 US Durable Goods Orders. Estimate 1.8%
  • 15:00 US Pending Home Sales. Estimate 0.5%

 

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.