USD/JPY – Improving Yen Shakes Off Mixed Japanese Data

The Japanese yen continues to improve in Wednesday trading. USD/JPY has lost close to one cent this week, as the yen has reversed its recent slide against the dollar. The pair is trading in the mid-102 range in Wednesday’s European session. In economic news, Japanese releases were mixed. Core Machinery Orders improved to 0.6%, but fell short of the estimate. The Corporate Goods Price Index continues to move higher, and posted a 2.7% gain in November, matching the estimate. There are no Japanese releases on Wednesday. In the US, today’s highlight is Crude Oil Inventories.

Japanese manufacturing data continues to look sluggish this week. The BSI Manufacturing Index and Tertiary Industry Activity both fell short of their estimates earlier this week. There was no relief from Core Machinery Orders, which posted a gain of 0.6%, up sharply from -2.1% last month. However, this was well below the estimate or 0.9%. There was better news on the inflation front, as CGPI, a corporate inflation index, continues to improve. The index jumped 2.7%, matching the forecast. Just how much has the inflation picture improved in Japan? Last December, the indicator was floundering, as it posted a decline of 0.9%.

In the US, last week’s employment numbers were excellent, as Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate all impressed. The Fed has said that a stronger employment picture is a prerequisite to QE tapering, and last week’s numbers certainly increase the possibility of the Fed taking action at its December policy meeting. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies.

With memories of the October government shutdown still fresh on Capitol Hill, lawmakers have reached a budget deal which Congress will have to approve. The agreement will remove the risk of a government shutdown and reduce the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the economic uncertainty we’ve seen in recent months. Congress must approve a budget, or the US could face another government shutdown in mid-January.

USD/JPY for Wednesday, December 11, 2013

USD/JPY December 11 at 11:55 GMT

USD/JPY 102.48 H: 102.94 L: 102.41

USD/JPY Technical

• USD/JPY continues to lose ground in Wednesday trading.
• 102.53 has reverted to a resistance role as the pair trades at lower levels. This is followed by resistance at 103.30.
• 101.19 is providing support. This is followed by support at the key level of 100.00.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 98.92 and 98.15
• Above: 102.53, 103.30, 104.17, 105.70 and 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in Wednesday trading. This is not reflected in the pair, as the yen continues to push upwards. The ratio continues to be made up of a majority of long positions, reflecting a trader bias towards the dollar reversing directions and posting gains against the yen.

The yen continues to move higher against the dollar on Wednesday. With the no key events out of the US on Wednesday, we can expect limited movement from the pair during the North American session.

USD/JPY Fundamentals

• 15:00 US Treasury Secretary Jack Lew Speaks.
• 15:30 US Crude Oil Inventories. Estimate -2.2M.
• 18:01 US 10-year Bond Auction.
• 19:00 US Federal Budget Balance. Estimate -142.6B.

*Key releases are highlighted in bold

*All release times are GMT

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