USD/JPY – Edges Higher Ahead of US Employment Releases

USD/JPY has moved higher, as the pair trades in the mid-98 range in North American trading. The Bank of Japan released the minutes of its recent policy meeting and as expected, the Bank stated it was continuing its current monetary policy.

The BOJ released the minutes of its last policy meeting, and the board’s members were cautiously optimistic about the economy, referring to the economic recovery as “moderate”, stating that exports had picked up, and other sectors such as consumer spending and industrial production were stable. The Bank noted that inflation was increasing and moving towards the target of 2%. The BOJ said it would continue to expand the monetary base by 60-70 trillion yen per year, and maintain the purchase of government bonds by 50 trillion yen each year.

Speaking to a group of business leaders in Osaka, BOJ head Haruhiko Kuroda expressed confidence that the Bank would successfully reach its inflation target of 2.0% by 2015. However, many analysts are skeptical that this goal will be met, as National Core CPI rose just 0.7% in September. The yen’s drop of about 12% in 2013 has provided some inflation by increasing import prices, but growth will have to improve if the inflation target is to be reached.

US key releases have started the week on a positive note. The ISM Non-Manufacturing PMI rose to 55.4 points in October, up from 54.4 the month before. This beat the estimate of 54.0 points. We’ll get a look at Unemployment Claims and Non-Farm Payrolls later in the week, and if these numbers are strong, there is sure to be talk of QE tapering in December, as the Fed has said on numerous occasions that the employment market must improve before QE tapering can occur.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. Still, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

 

USD/JPY for Wednesday, November 6, 2013

Forex Rate Graph 21/1/13

USD/JPY November 6 at 15:30 GMT

USD/JPY 98.73 H: 98.76 L: 98.41

 

USD/JPY Technical

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

 

  • USD/JPY has posted gains on Wednesday, as the proximate support and resistance lines (S1 and R1 above) remain in place.
  • On the downside, 98.15 continues to provide support. It is not a strong line and could see pressure if the yen shows any upward movement. This is followed by strong support at 97.18.
  • On the upside, the pair is facing resistance at 98.92. This line is followed by the key level of 100, which has held firm 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 has reversed direction on Wednesday, pointing to gains in short positions. This is not reflected in the current movement of the pair, as the dollar has posted gains against the yen. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar reversing position and moving higher.

The pair is trading in the mid-98 range on Wednesday. With no major releases out of the US, we could see the pair continue to trade in this range during the North American session.

 

USD/JPY Fundamentals

  • 3:45 Japanese 10-year Bond Auction. Actual 0.61%
  • 12:30 US Challenger Job Cuts. Actual -4.2%.
  • 15:00 US CB Leading Index. Estimate. 0.7%. Actual 0.7%.
  • 15:30 US Crude Oil Inventories. Estimate 1.7M. Actual 1.6M.

*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.