USD/JPY – Dollar Edges Up as Japanese Trade Deficit Widens

USD/JPY has edged higher as we begin the new trading week. The pair is trading slightly above the 98 line in Monday’s European session. In economic news, the Japanese trade deficit widened, hitting a seven-month high. Today’s highlight is US Existing Home Sales. The markets will also be keeping a close eye on Non-Farm Payrolls, which will be released on Tuesday.

Japan continues to post trade deficits. The deficit widened in September, jumping from -0.79 trillion to -1.09 trillion yen. This was higher than the estimate of -1.06 trillion, and was the highest deficit since February. With the Japanese yen shrinking by close to 25% in the past year, Japanese imports have become more expensive, and this cost has outstripped the growth in exports. Unless the yen improves dramatically, we can expect the long string of deficits to continue.

After a bitter political struggle which saw the US on the brink of a sovereign default, the Republicans and Democrats finally reached an agreement last week to reopen the government and raise the debt ceiling. However, the deal provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. So, we could be right back where we started in just a few months. The dollar initially gained ground after the agreement was announced, but was broadly lower as optimism faded.

The recent government shutdown cancelled some US economic releases, notably Non Farm Payrolls, one of the most important employment releases. The September report was supposed to be released in early October, but has been rescheduled for release on Tuesday. The NFP release could have a major impact on EUR/USD. Meanwhile, last week’s Unemployment Claims came in at 357 thousand, very close to the estimate of 358 thousand. This figure was an improvement from last week, but still well above previous releases. The shutdown inflated the release, as hundreds of thousands of Federal employees were laid off. This week’s estimate is lower, with an estimate of 341 thousand.

 

USD/JPY for Monday, October 21, 2013

Forex Rate Graph 21/1/13

USD/JPY October 21 at 10:50 GMT

USD/JPY 98.22 H: 98.25 L: 97.91

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
96.00 97.18 98.15 98.92 100.00 101.19

 

  • USD/JPY has edged higher in Monday trading. The pair crossed the 98 line late in the Asian session.
  • The pair is testing support at 98.15. This is followed by strong support at 97.18.
  • On the upside, USD/JPY is facing resistance at 98.92, which is protecting the 99 line. This is followed by the critical 100 level.
  • Current range: 98.15 to 98.92

 

Further levels in both directions:

  • Below: 98.15, 97.18, 96.00, 95.06 and 94.20
  • Above:, 98.92, 100, 101.19 and 102.53

 

OANDA’s Open Positions Ratio

USD/JPY ratio is continuing where it left off last week, pointing to movement towards short positions in Monday trading. This is not reflected in the movement of the pair, as the dollar is up slightly against the yen. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar moving higher.

The dollar has posted some gains following last week’s tumble against the yen. Will the upward trend continue? We could see some volatility later in the day, as the US releases major housing data.

 

USD/JPY Fundamentals

  • 4:30 Japanese All Industries Activity. Estimate 0.3%. Actual 0.3%.
  • 12:00 FOMC Member Charles Evans Speaks.
  • 14:00 US Existing Home Sales. Estimate 5.31M.
  • 14:30 US Crude Oil Inventories. Estimate 3.4M.

 

*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.