USD/JPY has dropped sharply on Wednesday, as the pair has lost close to 100 points. In the European session, the pair is trading in the low-97 range. The yen has received a boost from a disappointing Non-Farm Payrolls report. The key employment indicator was well short of the estimate and slumped to a six-month low. In economic news, it’s a very light schedule on Wednesday, with just three releases out of the US. There are no Japanese releases on Wednesday.
There was plenty of anticipation leading up to the release of US Non-Farm Payrolls on Tuesday, as the key indicator had been postponed from early October due to the government shutdown. However, the markets were in for a big disappointment, as NFP slipped to 148 thousand in September, compared to 169 thousand in August. This was a six-month low, and well off the estimate of 182 thousand. The US unemployment rate dipped to 7.2%, a five-year low, but this does not point to increased employment, as the participation rate remained at 63.8%, its lowest level since 1978. These figures indicate that the US labor market continues to have difficulty creating new jobs.
There was some optimism and relief last week, as the Republicans and Democrats finally reached an agreement last week to reopen the government and raise the debt ceiling, following weeks of fighting in Congress. 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. Both sides have agreed to discuss budget issues and try to reach a long-term agreement before December 13. So we could be right back where we started in just a few months. At the same time, the public is angry at lawmakers for creating the crisis, and with congressional elections only a year away, the politicians on Capitol Hill may think twice before plunging the country into another fiscal and political crisis.
The US government is again functioning and a default has been averted, but the agreement hammered out in Congress last week provides short-term relief only, as it raises the debt ceiling until early February and funds the government until mid-January. The underlying budgetary issues remain unresolved, consumer confidence has been shaken and employment numbers are not looking good. Given this situation, the Fed is unlikely to push the taper trigger until early 2014, perhaps not before March or April.
USD/JPY for Wednesday, October 23, 2013
USD/JPY October 23 at 11:15 GMT
USD/JPY 97.36 H: 98.19 L: 97.16
- USD/JPY has posted sharp losses in Wednesday trading. The pair dropped below the 0.98 line late in the Asian session and continues to fall in European trading.
- There is strong pressure on the support level of 97.18 and it could break if the yen continues to chalk up gains. This is followed by support at the round number of 96.00.
- On the upside, 0.9815 has reverted to a resistance line. This is followed by resistance at 98.92, which is protecting the 99 line.
- Current range: 97.18 to 98.15
Further levels in both directions:
- Below: 97.18, 96.00, 95.06 and 94.20
- Above: 98.15, 98.92, 100, 101.19 and 102.53
OANDA’s Open Positions Ratio
USD/JPY ratio is pointing to movement towards long positions in Wednesday trading. This is not reflected in the movement of the pair, as the yen has posted sharp gains against the dollar. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar reversing direction and moving higher.
The dollar is down sharply against the yen, courtesy of a weak Non-Farm Payrolls report. We could see the yen continue to post gains against the retreating dollar in the North American session.
- 12:30 US Import Prices. Estimate 0.3%.
- 13:00 US HPI. Estimate 0.8%.
- 14:30 US Crude Oil Inventories. Estimate 2.7M.
*Key releases are highlighted in bold
*All release times are GMT
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