USD/JPY – Yen Improves as US Employment Numbers Disappoint

The yen continues to lose ground at the hands of the US dollar. The Japanese currency has lost more ground on Friday, as USD/JPY was trading in the high-99 range in the European session. The dollar was given a boost by excellent US employment and manufacturing numbers on Thursday. In Japan, the Monetary Base indicator continues to rise, but fell short of expectations. In the US, there are two major employment releases on Friday – Non-Farm Employment Change and the Unemployment Rate. As well, FOMC member James Bullard addresses a finance conference in Boston. There are no Japanese releases on Friday.

The yen has suddenly hit some major turbulence, and has coughed up around 200 points since early Thursday. The surging US dollar is now within striking distance of the psychologically-important 100 level. The dollar was buoyed by strong US numbers on Thursday. The all-important Unemployment Claims sparkled, as the indicator posted its lowest figure since May, at 326 thousand. This was a sharp drop from the previous reading of 343 thousand, and easily surpassed the estimate of 346 thousand. Not to be outdone, ISM Manufacturing PMI climbed from 50.9 to 55.4 points, its best performance since May 2011. These strong releases come on the heels of Advance GDP and ADP Non-Farm Payrolls, which looked very sharp as well. The dollar has responded with broad gains against the major currencies.

Anyone expecting dramatic news from the Federal Reserve on Wednesday came home empty-handed. As expected, the Fed said it would continue with the present level of QE, which involves $85 billion in asset purchases each month, and gave no indication about when it might scale down QE. There has been talk that the Fed could taper QE as early as September, and the speculation and uncertainty will likely cause volatility in the markets as long as the Fed doesn’t show its cards. The Fed gave a cautious thumbs-up to current economic activity, noting that the economy was growing at a “modest” pace.

The markets will get another good look at the US labor picture, with the release of the Unemployment Rate and Non-Farm Payrolls on Friday. Unemployment Claims looked sharp on Thursday, and the markets will be hoping for more good news. Employment releases are always considered market-movers, but they have taken on added significance since the Federal Reserve has stated more than once that a stronger employment market is needed before the Fed will scale down QE. Since the Fed has declined to provide specific timelines, speculation about QE tapering increases every time the markets see a strong employment release. So if there is good news from Friday’s releases, we can expect more talk of QE tapering and we could see the dollar gain more ground against the yen.

 

USD/JPY for Friday, August 2, 2013

Forex Rate Graph 21/1/13

 

USD/JPY August 2 at 11:50 GMT

USD/JPY 99.78 H: 99.85 L: 99.28

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
97.83 98.43 99.45 100.00 100.85 101.66

 

USD/JPY continues to push higher, and is closing in on the 100 level. The pair touched a high of 99.85 earlier in European trade.  USD/JPY is receiving support at 99.45. This is a weak line and could face pressure if the yen can reverse directions. 98.43 is providing stronger support.

On the upside, USD/JPY faces resistance at the significant number of 100. This weak line could fall if the pair’s upward momentum continues. This is followed by stronger resistance at 100.85.

  • Current range: 99.45 to 100.00

 

Further levels in both directions:

  • Below: 99.45, 98.43, 97.83, 97.18, 96.20 and 95.60
  • Above: 100.00, 100.85, 101.66 and 102.53

 

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little change on Friday, continuing a trend we have seen throughout the week. This is not reflected in what we are currently seeing from the pair, as the dollar has posted modest gains against the yen in Friday trading. Long positions continue to enjoy a sizeable majority of open positions, indicating that trader sentiment is biased in favor of the US dollar continuing to move higher.

The US dollar continues to hammer away at the yen, courtesy of strong US employment and manufacturing numbers on Thursday. Will the dollar break above the 100 line? We could see the answer as early as this afternoon, when the US releases major employment numbers. If the readings are strong, we can expect the dollar to post further gains against the yen.

 

USD/JPY Fundamentals

  • 12:30 US Non-Farm Employment Change. Estimate 184K.
  • 12:30 US Unemployment Rate. Estimate 7.5%.
  • 12:30 US Average Hourly Earnings. Estimate 0.2%.
  • 12:30 US Core PCE Price Index. Estimate. 0.1%.
  • 12:30 US Personal Income. Estimate 0.5%
  • 12:30 US Personal Spending. Estimate 0.5%.
  • 14:00 US Factory Orders. Estimate 2.3%.
  • 16:15 US FOMC Member James Bullard Speaks.

 

*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.