USD/JPY – Rally Continues as Dollar Approaches 103

The dollar continues to post gains against the yen in Monday trading, as USD/JPY trades in the high-102 range. The pair has climbed about 150 points in less than a week, as the yen trades at its lowest levels since May. In economic news, Japanese Capital Spending was well below the estimate. In the US, today’s key event is the ISM Manufacturing PMI. As well, Federal Reserve Chairman will deliver remarks in Washington, as analysts look for some hints about QE tapering from the Federal Reserve.

In Japan, Capital Spending posted a gain of 1.5% in Q3. The indicator has come a long way since Q4 of 2012, when it posted a decline of 8.7%. However, the Q3 reading was well short of the estimate of 3.1%, and the yen lost ground as result. Meanwhile, Bank of Japan Governor Haruhiko Kuroda said on Monday that he remained committed to the BOJ’s inflation target of 2% within two years, even though inflation indicators point to much lower inflation. Kuroda also said that the Bank’s ultra-loose monetary policy would continue until the inflation target was met. Under this policy, the Japanese economy has shown some improvement, but the yen has taken a beating as it trades close to the 103 line.

Thursday was a busy day for Japanese releases, and the major events painted a mixed picture. Household Spending  and Preliminary Industrial Production both were well short of their estimates. The news was better from Japanese inflation indicators, which continue to point upwards. Tokyo Core CPI hit 0.6%, its sharpest rise since January 2009. National Core CPI followed suit, with a gain of 0.9%, matching the forecast. This was the index’s best showing in almost five years. The strong inflation numbers signal that the Abe government is making great strides to stamp out deflation, which had hobbled the economy for years. However, inflation is nowhere near the 2% target which the Bank of Japan has set, and some policymakers are less optimistic than BOJ Governor Kuroda that this ambitious goal will be achieved.

Over in the US, the markets will be keeping close tabs on this week’s US employment releases, as the Fed is likely to step in and taper QE if employment numbers continue to improve. Unemployment Claims have looked sharp for the past two releases, and if the Non-Farm Payrolls and Unemployment Rate look solid, this week, the US dollar could gain more ground against the struggling yen.

USD/JPY for Monday, December 2, 2013

USD/JPY December 2 at 11:20 GMT

USD/JPY 102.88 H: 102.89 L: 102.23

USD/JPY Technical

• USD/JPY has posted gains in Monday trading. The pair has touched a high of 102.89 in the European session, as the yen remains under strong pressure.
• The pair is facing resistance at 103.30. Given the pair’s current upward movement, this line cannot be considered safe. This is followed by resistance at 104.17, which has remained intact since October 2008.
• 102.53 has reverted to a support role as the yen loses ground. This line is followed by support at 101.19.
• Current range: 102.53 to 103.30

Further levels in both directions:

• Below: 102.53, 101.19, 100.00, 98.92 and 98.15
• Above: 103.30, 104.17, 105.70 and 107.27

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in Monday trading, continuing the trend we saw on Friday. This movement is not reflected in the pair’s current movement, as the yen has resumed its losing ways. The ratio remains close to an even split between long and short positions, which reflects a lack of trader bias as to which direction the pair might take.

The pair continues to trade at high levels, and is within striking distance of the 103 line. We could see some further movement in the North American session, as the US releases a key PMI later in the day.

USD/JPY Fundamentals

• 2:30 Japanese Capital Spending. Estimate 3.1%. Actual 1.5%.
• 2:30 Bank of Japan Governor Haruhiko Kuroda Speaks in Nagoya.
• 13:30 Fed Chairman Bernard Bernanke Speaks.
• 14:00 US Final Manufacturing PMI. Estimate 54.3 points.
• 14:00 US Construction Spending (September Data). Estimate 0.5%.
• 15:00 US ISM Manufacturing PMI. Estimate 55.2 points.
• Sep. Data – US Construction Spending. Estimate 0.5%.
• 15:00 US ISM Manufacturing Prices. Estimate  55 points.

*Key releases are highlighted in bold

*All release times are GMT

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