USD/JPY – Rangebound as Markets Keep Eye on US Manufacturing Data

USD/JPY has started the week in quiet fashion, continuing where it left off on Friday. In Monday’s European session, the pair is trading in the mid-98 range. It’s a very light schedule on Monday, highlighted by US Core Durable Goods Orders. In Japan, CSPI posted another gain and matched the forecast.

When will the US Federal Reserve scale down QE? That is the million dollar question which continues to preoccupy the markets. The release last week of the FOMC didn’t provide any hints, but appeared to confirm that QE tapering is a question of “when” rather than “if”. The minutes showed that Fed policymakers favor scaling back the bond-buying program, but are divided on the timing of such a move. The policymakers stated that recent US economic data was “mixed”, and all members agreed that it was still too early to scale back the current bond-buying levels of $85 billion each month. QE is a dollar-positive event, so traders should prepare for the US currency to post gains against the major currencies when the Fed decides to taper.

The annual Jackson Hole Summit concluded on the weekend, but anyone expecting some clarity on QE tapering was in for a disappointment. Federal Reserve head Bernard Bernanke was a no-show, and other policymakers didn’t hesitate to share their views. Dennis Lockhart, head of the Atlanta Fed, said that tapering could start in September, but only if US economic numbers justified such a move. There was a more hawkish statement from James Bullard, head of the St. Louis Fed. Bullard said that there was no need for the Fed to rush into QE tapering. The uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and had worldwide repercussions, such as causing jittery investors to pull billions of dollars out of emerging markets.

US New Home Sales had beaten the estimate for four consecutive releases, but that impressive streak came to a crashing end on Friday, as the key housing indicator slid to its lowest level since January. The indicator came in at 394 thousand, nowhere near the estimate of 487 thousand. Earlier last week, US Unemployment Claims also was well off market expectations. Despite these disappointing releases, the US dollar remains steady against the euro, as the markets seemed more focused on QE than the latest US economic release.

In Japan, the Corporate Services Price Index posted its second straight gain, rising 0.4%. This matched the market forecast. Although not a major release, the CSPI was good news, as the cornerstone of Abenomics has been to stamp out deflation, which has hobbled the Japanese economy for years. The economy seems to responding to the government’s aggressive economic platform and there are signs of increased economic activity as many releases point upwards. We’ll get a chance to see other Japanese inflation indicators later in the week.

 

USD/JPY for Monday, August 26, 2013

Forex Rate Graph 21/1/13

 

USD/JPY August 26 at 11:45 GMT

USD/JPY 98.61 H: 98.84 L: 98.44

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
97.18 97.83 98.43 99.45 100.00 100.85

 

USD/JPY is almost unchanged in Monday trading. In the Asian session, the pair touched a high of 98.84 but has edged lower in European trading. USD/JPY continues to face resistance at 99.45. This is followed by resistance at the all-important 100 level.

On the downside, USD/JPY continues to receive support at 98.43. This is not a strong line, and could face pressure if the dollar retreats. This is followed by support at 97.83.

  • Current range: 98.43 to 99.45

 

Further levels in both directions:

  • Below: 98.43, 97.83, 97.18, 96.20, 95.60 and 94.29
  • Above: 99.45, 100.00, 100.85 and 101.66

 

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged as we start the new trading week. This is reflected in the current movement of USD/JPY, which is rangebound. Traders should keep a close eye on the ratio, as increased movement could be an early indication of a breakout by the pair.

USD/JPY continues to trade quietly in the mid-98 range. The US will release key manufacturing data later in the day, and this could impact on USD/JPY if the reading is not in line with market expectations.

 

USD/JPY Fundamentals

  • 12:30 US Core Durable Goods Orders. Exp. 0.6%.
  • 12:30 US Durable Goods Orders. Exp. -3.0%

 

*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.