USD/JPY – Steady Ahead of Key US Numbers

USD/JPY has edged higher in Tuesday trading as the pair is back above the 104 line. In economic news, the Bank of Japan released its monthly bulletin. Later in the day, we’ll get a look at inflation, with the release of the Corporate Services Price Index. In the US, there are two major events on the schedule – Core Durable Goods Orders and New Home Sales.

There were no surprises last week from the Bank of Japan, which issued a Monetary Policy Statement on Friday. As expected, the Bank is holding steady with its monetary base and asset purchase programs. The BOJ said it will continue to increase the monetary base by 60-70 trillion yen annually and the purchase of Japanese government bonds by 50 trillion each year. The Bank’s aggressive monetary policy has revived the economy and put the breaks on deflation, but has severely weakened the yen, which is trading at five-year lows against the US dollar.

US releases ended on a positive note last week, as GDP climbed 4.1% in Q3, compared to 2.6% in the previous quarter. This was the indicator’s sharpest gain since Q1 of 2010. The estimate stood at 3.6%. Meanwhile, Unemployment Claims jumped to 379 thousand claims last week, up from 368 thousand the week before. This was well above the estimate of 336 thousand. The previous release’s weak numbers were attributed to the holiday season, but two consecutive poor releases will certainly not comfort the markets. There was more bad news to follow, as Existing Home Sales and the Philly Fed Manufacturing Index fell short of their estimates.

The markets are still buzzing after last week’s announcement by the Federal Reserve that it would begin tapering its QE program by $10 billion a month, commencing in January. This will reduce the Fed’s asset purchases to $75 billion every month, comprised of $40 billion in Treasuries and $35 billion in mortgage bonds. The announcement came as somewhat of a surprise, as most analysts had expected the Fed to hold off on any QE reductions until early next year. The dollar took full advantage and shot up about 160 points against the slumping yen.

In its dramatic tapering announcement, the Federal Reserve was careful to separate tapering from rate hike expectations. Fed chairman Bernard Bernanke stated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%. Previously, the Fed had stated that it would start to consider rate increases when unemployment fell below this level. Bottom line? With the unemployment rate at 7.0%, it could be a while before we see higher interest rates in the US.

 

USD/JPY for Tuesday, December 24, 2013

Forex Rate Graph 21/1/13

USD/JPY December 24 at 11:45 GMT

USD/JPY 104.29 H: 104.41 L: 104.14

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
102.53 103.30 104.17 105.70 106.85 107.73

 

  • USD/JPY has edged higher in Tuesday trading.
  • 104.17 is providing support. This line could face pressure if the yen continues to improve. This is followed by support at 103.30.
  • On the upside, there is resistance at 105.70. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
  • Current range: 104.17 to 105.70

 

Further levels in both directions:

  • Below: 104.17, 103.30, 102.53, 101.19 and 100.00
  • Above: 105.70, 106.85, 107.73 and 108.77

 

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Tuesday trading. This is reflected in the pair’s movement, as the dollar has moved slightly higher against the yen. The ratio is made up of a narrow majority of long positions, reflecting a slight trader bias towards the dollar gaining ground against the yen.

USD/JPY is trading slightly above the 104 line. With the US releasing key manufacturing and housing data later in the day, we could see some volatility from the pair during the North American session.

 

USD/JPY Fundamentals

  • 5:00 BOJ Monthly Report.
  • 13:30 US Core Durable Goods Orders. Estimate 0.9%.
  • 13:30 US Durable Goods Orders. Estimate 0.9%.
  • 14:00 US HPI. Estimate 0.5%.
  • 15:00 US New Home Sales. Estimate 449K.
  • 15:00 US Richmond Manufacturing Index. Estimate 15 points.
  • 23:50 Japanese Corporate Services Price Index. Estimate 0.8%.

 

*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.