USD/JPY – Tests 102 as US Numbers Point Up

After finally breaking the 100 barrier late last week, the US dollar continues to sizzle. USD/JPY briefly pushed above the 102 line earlier on Monday, before retracting back to the mid-101 range. In economic news, US releases ended last week on a positive note, as the Federal Budget Balance posted a surplus that was higher than expected. The US will release key retail sales numbers later on Monday. In Japan, M2 Money Stock rose from 3.0% to 3.3%, beating the estimate of 3.1%. The markets will get another look at inflation figures, with the release of the Corporate Goods Price Index. The markets are expecting another decline, with an estimate of -0.2%.

After a few failed tries, the US dollar finally laid claim to the psychologically important 100 summit. The pair had come close a couple of times, but retracted on each occasion. It was the first time since May 2009 that the pair found itself in three digit levels. Not surprisingly, Japan’s trading partners are not happy with the weakening yen, as they struggle to keep their exports competitive. South Korea, with an export-dependent economy, cut its interest rate by 0.25% on Thursday in order to boost growth and compete with the yen. The Japanese currency has already depreciated 14% against the dollar in 2013, and with the BOJ moving full steam ahead with aggressive monetary easing, we can expect the yen to continue to point downwards. The week started off with the pair pushing above 102, its highest level since October 2008.

There was only one major release out of the US last week, and the dollar took advantage, as US Unemployment Claims looked sharp. There were 323 thousand new claims, well below the estimate of 333 thousand. This was the third week in a row that Unemployment Claims has come in below expectations. This points to an improving employment picture in the US, but the markets will want to see strong numbers from other sectors of the economy to be convinced that the US is headed in the right direction.

After a bad streak in April, we are seeing better numbers out of the US, notably employment figures. This has raised speculation that the Fed might adjust or even terminate its QE program, in which it buys $85 billion in assets every month. Terminating the QE program is dollar positive, and the US dollar was broadly stronger against all the major currencies on Friday. The markets will be looking for any clues as to the Fed ending QE, which would likely push the dollar higher.

 

USD/JPY for Monday, May 13, 2013

Forex Rate Graph 21/1/13

USD/JPY May 13 at 11:30 GMT

USD/JPY 101.64 H: 101.97 L: 101.51

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 100.54 101.81 102.57 103.75

 

USD/JPY continues to push higher, and dipped above the 102 line in Monday’s Asian session. The pair is facing resistance at 101.81. This weak line was breached earlier, and could face more pressure from the surging dollar. There is a stronger line of resistance at 102.57. On the downside, there is support at 100.54. This line has strengthened as the pair trades at higher levels. This is followed by support at the 100 level.

  • Current range: 100.54 to 101.81

 

Further levels in both directions:

  • Below: 100.54, 100, 99.57, 98.45 and 97.24
  • Above: 101.81, 102.57, 103.75 and 104.94

 

OANDA’s Open Positions Ratio

USD/JPY is pointing to movement towards short positions in the Monday session. This is consistent with what we are seeing from the pair, which has edged lower after the dollar showed some strength earlier. The ratio is almost evenly divided between open long and short positions, indicating a split among traders as to what to expect next from the volatile pair.

With the dollar continuing to push ever higher, the conquering of the 100 level is almost old news. USD/JPY has settled down, but we could see some more volatility as the US releases key retail sales numbers.

 

USD/JPY Fundamentals

  • 12:30 US Core Retail Sales. Estimate -0.1%.
  • 12:30 US Retail Sales. Estimate -0.3%.
  • 14:00 US Business Inventories. Estimate 0.3%.
  • 23:50 Japanese Corporate Goods Price Index. Estimate -0.2%.

 

*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.