USD/JPY – Dollar Inches Closer to 100 Line

USD/JPY is steady in Tuesday trading, as the pair has crept closer to the 100 level. The pair is trading in the 99.80 range in the European session. Will the dollar push into 100 territory? In economic news, the week started off on a positive note in both Japan and the US. The Japanese Tankan indexes were positive, and US ISM Manufacturing PMI beat the estimate. On Tuesday, Japanese Monetary Base continues to move higher, but missed the estimate. In the US, today’s highlight is Factory Orders.

The Japanese Tankan indexes, which are released quarterly, were both positive. The Manufacturing Index jumped from -8 points to 4 points, and beat the estimate of 3 points. This was the best showing since Q1 of 2011. The Non-Manufacturing Index kept pace, climbing from 6 points to 12 points, which matched the estimate. These positive readings come on the heels of some Japanese numbers last week, and indicate that the Japanese economy is showing signs of improvement. Japanese Monetary Base continues to rise and hit 36%. However, this fell short of the estimate of 41.2%. Average Cash Earnings dropped to 0.0%, well below the forecast of 0.6%. 10-year bonds posted an average yield of 0.88%, almost unchanged from the previous release.

The markets may have become accustomed to seeing mixed numbers out of the US, but last week’s releases were mostly solid, helping to boost market confidence and the US dollar. Manufacturing, consumer confidence and housing numbers all beat their estimates. Unemployment Claims bounced back after a poor release the week before, and almost matched the estimate. Although GDP fell short of the estimate, the dollar remained strong, as the indicator pointed to respectable growth by the US economy. These solid numbers are particularly encouraging as they come from a wide range of economic sectors. Further strong numbers out of the US could be an indication that the recovery is gaining steam.

Global growth has been sputtering for some time, and there was more bad news on Friday, as an HSBC report downgraded its forecast for global growth. Global GDP was cut from 2.8% to 2.0% in 2013, and from 3.1% to 2.6% in 2014. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging countries such as India and Brazil. The report also revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4% to 7.4% for next year.  Weaker global growth will be bad news for countries which heavily depend on exports, such as Japan, Canada and Australia, and could have a negative impact on these countries’ currencies.

USD/JPY for Tuesday, July 2, 2013

USD/JPY 99.75 H: 99.90 L: 99.51

USD/JPY Technical

USD/JPY continues to trade very close to the 100 level, but is yet to cross this critical barrier. The pair continues to receive weak support at 99.57. There is a stronger level at 98.43. On the upside, the pair faces resistance at the 100 line. This weak line could fall at anytime. This is followed by resistance at 100.85.

• Current range: 99.57 to 100.00

Further levels in both directions:

• Below: 99.57, 98.43, 97.83, 97.18, 96.03 and 94.91
• Above: 100.00, 100.85, 101.66 and 102.52

OANDA’s Open Positions Ratio

USD/JPY ratio has extended the trend we saw on Monday, as the ratio points to movement towards short positions in Tuesday trading. We are not seeing this reflected in the pair, as the dollar has edged a bit higher against the yen. Long positions continue to dominate the open positions, indicating a strong trader bias towards USD/JPY moving higher.

The markets are watching carefully as USD/JPY continues to put pressure on the critical 100 level. There are no major releases out of the US , so it could be a quiet day for the pair.

USD/JPY Fundamentals

• 1:30 Japanese Average Cash Earnings. Estimate 0.6%. Actual 0.0%.
• 3:45 Japanese 10-year Bond Auction. Actual 0.88%.
• 14:00 US Factory Orders. Estimate 2.0%.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 49.3 points.
• All Day – US Total Vehicle Sales. Estimate 15.3M.
• 16:30 FOMC Member William Dudley Speaks.
• 21:45 FOMC Member Jerome Powell Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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