USD/JPY – Yen Posts Gains After Weak Chinese Data

The Japanese yen has rebounded and posted gains in Thursday trading. In the European session, USD/JPY is trading slightly above the 104 line. The only Japanese release on Thursday is the Bank of Japan Monthly Report.  We’ll get a look at the first US events of the week, with the release of Unemployment Claims and Existing Home Sales. The markets are expecting strong December numbers from both key releases.

The Japanese yen received some help on Thursday from a weak Chinese Manufacturing PMI, which sent nervous investors to the safe-haven Japanese currency. The key PMI dropped below the 50-point level for the first time since June, coming in at 49.6 points, missing the estimate of 50.6 points. A reading below 50 indicates contraction. Earlier in the week, the BOJ announced that its aggressive monetary plan would continue. Under the scheme, the BOJ will continue to expand the monetary base by 60-70 trillion yen annually. The Bank noted that the economy continues to recover at a moderate pace, with the GDP for 2013 expected to expand by 2.7%, but drop to a 1.4% gain in 2014. Inflation is projected at 0.7% gain in 2013, jumping to 3.3% in 2014.

The World Economic Forum kicked off Wednesday in Davos, Switzerland. The prestigious event will see senior political officials, head of foreign banks and business people from dozens of countries meet, mingle and conduct business. Traders should note that currency markets can be affected by statements issued at the forum, particularly those made by central bankers or other senior officials.

Weak inflation concerns are not restricted to Europe or Japan, as the US has also been plagued by persistently low inflation, an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten. Analysts will be watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.

USD/JPY for Thursday, January 23, 2014

USD/JPY January 23 at 13:20 GMT

USD/JPY 104.04 H: 104.84 L: 104.02

USD/JPY Technical

• USD/JPY has posted losses in Thursday trading. The pair has dropped to a low of 104.01 as the dollar remains under pressure.
• 104.17 has switched to a resistance role. This is a weak line which could see further activity during the day. This is followed by resistance at 105.70.
• 103.30 is providing support. This is followed by a support line at 102.50.
• Current range: 103.30 to 104.17

Further levels in both directions:

• Below: 103.30, 102.53, 101.19 and 100.00
• Above: 104.17, 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 Thursday trading. This is not reflected in what we are seeing from the pair, as the yen has reversed directions and has posted gains against the dollar. Long positions have a majority in the USD/JPY ratio, indicating trader bias towards the dollar moving higher.

The yen has posted gains in Thursday trading. With the US releasing key employment and housing data later in the day, we could see some movement from the pair during the North American session.

USD/JPY Fundamentals

• 5:00 Bank of Japan Monthly Report.
• Day 2 – WEF Annual Meetings.
• 13:30 US Unemployment Claims. Estimate 331K.
• 14:00 US Flash Manufacturing PMI. Estimate 55.2.
• 14:00 US HPI. Exp. 0.4%.
• 15:00 US Existing Home Sales. Estimate 4.94M.
• 15:00 US CB Leading Index. Estimate 0.2%.
• 15:30 US Natural Gas Storage. Estimate -112B.
• 16:00 US Crude Oil Inventories. Estimate 0.7M.

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