The Japanese yen continues to hold its own against the US dollar in Tuesday trading. USD/JPY edged lower in the European session, and was trading in the mid-97 range. Japanese releases were mixed on Monday. The Unemployment Rate fell to 4.1%, its lowest rate in 2013. Household Spending looked sharp, jumping to 5.2%. This blew past the estimate of 1.8%. There was bad news as well, as Preliminary Industrial Production gained 0.2%, missing the estimate of 0.4%. Retail Sales declined 0.3%, surprising the markets which had anticipated a gain of 0.5%. In Tuesday’s releases, the major US release is CB Consumer Confidence. The lone Japanese release is Housing Starts.
As was widely expected, the Bank of Japan did not announce any new monetary stimulus at its policy meeting on Friday. The BoJ did state that it could take more than two years to reach its 2% inflation target. This possibility has been underscored by recent Japanese inflation releases, which continue to point to deflation in the economy, despite the best efforts of the BOJ to create some inflation. This could mean that the central bank will resort to further easing measures later in the year.
Meanwhile, the OECD has weighed in on developments in Japan. The well-respected organization said it was encouraged by the government’s efforts to restore growth by easing monetary policy and achieve a 2% inflation target. However, the OECD noted its concern about the rising national debt, which is more than double the size of the Japanese economy. However the rating agency Standard & Poor was less effusive in its praise, stating that it had found little evidence of the economy improving, and warned that a downgrade to Japan’s debt was a real possibility.
There was more disappointing news out of the US on Friday, as GDP fell below expectations. With a long string of weak releases for the past month, the GDP reading appeared to underscore the recent disappointing data. The key indicator improved sharply, climbing from -0.1% to 2.5%. However, the markets had anticipated a gain of 3.1%. The weaker than expected reading from one of the most important economic indicators should serve as a wakeup call that the US economy is hitting turbulence, which could affect the US dollar.
USD/JPY for Tuesday, April 30, 2013
USD/JPY April 30 at 11:50 GMT
USD/JPY 97.50 H: 98.12 L: 97.36
USD/JPY remains steady in Tuesday trading, as the proximate resistance and support levels remain in place (R1 and S1 above). On the downside, the pair continues to receive support at 97.24. The next support level is at 96.03, protecting the 96 level. The pair faces resistance at 98.45. This is followed by resistance at 99.57.
- Current range: 97.24 to 98.45
Further levels in both directions:
- Below: 97.24, 96.03, 95.27 and 94.19
- Above: 98.45, 99.57, 100, 100.54 and 101.81
OANDA’s Open Position Ratios
USD/JPY is showing movement in the direction of long positions. Although we are not seeing this reflected in the pair, which has been quiet, this could be an indication that the US dollar will improve. Long positions make up a solid majority in the ratio, indicating that trader sentiment is strongly biased towards the dollar pushing higher at the expense of the yen.
After coming very close to the 100 level, the yen has fought back, and is now trading close the 98 line. The dollar remains under pressure following the weak GDP reading. We could see some movement from the pair later today, as the US releases key housing data.
- 5:00 Japanese Housing Starts. Estimate 5.7%. Actual 7.3%.
- 12:30 US Employment Cost Index. Estimate 0.5%.
- 13:00 US S&P/CS Composite-20 HPI. Estimate 9.1%.
- 13:45 US Chicago PMI. Estimate 52.5 points.
- 12:00 US CB Consumer Confidence. Estimate 61.4 points.
*Key releases are highlighted in bold
*All release times are GMT