USD/JPY – Dollar Edges Higher Ahead of Non-Farm Payrolls

USD/JPY continues to edge higher on Tuesday. The pair is pointing upwards for a third straight day, as the dollar makes up for sharp losses sustained last week. In Tuesday’s European session, the pair is trading in the mid-98 range. On Monday, US Existing Home Sales fell short of the estimate. The markets are eagerly awaiting US Non-Farm Payrolls, which was not released earlier this month due to the government shutdown. The US Unemployment Rate will also be released later today. There are no Japanese releases on Tuesday.

The markets are anxiously waiting for some key US employment data on Tuesday. The recent government shutdown cancelled some US economic releases, notably Non Farm Payrolls, one of the most important employment releases. The September report and the Unemployment Rate were supposed to be released in early October, but have been rescheduled for release on Tuesday. The NFP release could have a major impact on USD/JPY. 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.

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 markets had expected the Federal Reserve to taper QE back in September, but the prolonged shutdown and debt crisis will likely mean that the Fed will shy away from any QE moves until early next year. On Monday, Chicago Fed Reserve President Charles Evans reiterated his support for continued monetary stimulus, saying that the Fed would likely need a few more months of US employment data before reducing QE. Currently, the Fed is purchasing $85 billion worth of bonds each month, and any scaling back will have a strong impact on the US dollar. Evans said that he doesn’t expect the Fed to make a move at the December policy meeting, given that the deal reached in Congress to reopen the government and raise the debt ceiling does so only for a few months.

 

USD/JPY for Tuesday, October 22, 2013

Forex Rate Graph 21/1/13

USD/JPY October 22 at 11:10 GMT

USD/JPY 98.33 H: 98.40 L: 98.14

 

USD/JPY Technical

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

 

  • USD/JPY continues to gain ground in Tuesday trading.
  • There is strong pressure on the support level of 98.15. This is followed by 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, which has not been tested since mid-September.
  • 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 unchanged in Tuesday 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 continuing to move higher.

The dollar continues to move upwards against the yen. Will the upward trend continue? We could see some volatility later in the day, as the US releases Non-Farm Payrolls.

 

USD/JPY Fundamentals

  • 12:30 US Non-Farm Employment Change. Estimate 182K.
  • 12:30 US Unemployment Rate. Estimate 7.3%.
  • 12:30 US Average Hourly Earnings. Estimate 0.2%.
  • 13:00 US TIC Long-Term Purchases. Estimate 30.9B.
  • 14:00 US Construction Spending. Estimate 0.5%.
  • 14:00 US Richmond Manufacturing Index. Estimate 0 points.
  • 14:30 US Natural Gas Storage. Estimate 81B.

 

*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.