USD/JPY – Yen Tumbles As US Retail Sales Improves

USD/JPY jumped over 100 points on Thursday, climbing to the mid-103 range. The pair has settled down on Friday and is showing little movement. On Thursday, US releases were mixed, as Unemployment Claims jumped. while Retail Sales and Core Retail Sales beat their estimates. On Friday, we’ll get a look at US inflation numbers, with the release of PPI and Core CPI. In Japan, Revised Industrial Production gained 1.0%, beating the estimate.

Last week’s US employment numbers were excellent, but Thursday’s Unemployment Claims, the highest in nine weeks, dampened the party. The Fed has said that a stronger employment picture is a prerequisite to QE tapering, and the markets are prepared for 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. Meanwhile, Retail Sales gained 0.7%, its best reading since February. Core Retail Sales posted a gain of 0.4%, up from 0.2% a month earlier.

There was some good news on the fiscal front, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate next week, will remove the risk of a government shutdown and reduces 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 fiscal uncertainty we’ve seen in recent months.

Japanese manufacturing data continues to flounder. 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. Under the government’s radical monetary policy, inflation is on the rise, after years of deflation which hobbled the economy.

USD/JPY for Friday, December 13, 2013

USD/JPY December 13 at 9:35 GMT

USD/JPY 103.55 H: 103.92 L: 103.42

USD/JPY Technical

• USD/JPY is almost unchanged in Friday trading. The pair touched a high of 103.92 late in the Asian session but has edged lower.
• 103.30 is providing weak support. This is followed by a support level at 102.53.
• On the upside, 104.17 is providing resistance. This is followed by resistance at 105.70, which has remained intact since September 2008.
• Current range: 103.30 to 104.17

Further levels in both directions:

• Below: 103.30, 102.53, 101.19, 100.00 and 98.92
• Above: 104.17, 105.70, 106.85 and 107.73

OANDA’s Open Positions Ratio

USD/JPY ratio has reversed positions in Friday trading and is pointing to gains in short positions. This is not reflected in the pair, which is showing very little movement. The ratio continues to be made up of a majority of long positions, reflecting a trader bias towards the dollar continuing to move higher.

The pair is trading in the mid-103 range in Friday trading. With the US releasing key inflation data later in the day, we could see some movement from USD/JPY during the North American session.

USD/JPY Fundamentals

• 4:30 Japanese Revised Industrial Production. Estimate 0.5%. Actual 1.0%.
•  13:30 US PPI. Exp. 0.0%.
• 13:30 US Core CPI. Exp. 0.1%.

*Key releases are highlighted in bold

*All release times are GMT

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