USD/JPY – Yen Gains On Positive Japanese Data

The Japanese yen has reversed directions and posted gains in Friday trading. In the European session, USD/JPY is trading in the low-102 range. In economic news, Japanese inflation and housing data was solid, but consumer spending and manufacturing indicators disappointed. In the US, today’s highlight is UoM Consumer Sentiment.

In Japan, inflation indicators were positive, as Tokyo Core CPI remained unchanged at 0.7%, matching the forecast. National Core CPI edged up to 1.3%, surpassing the estimate of 1.2%. However, inflation still has a long way to go to reach the BOJ’s target of 2.0%. Household Spending, an important gauge of consumer spending, rose 0.7%, up nicely from 0.2% a month earlier. However, this fell short of the estimate of 1.2%. Preliminary Industrial Production followed suit, rising to 1.1% compared to just 0.2% in November. This points to improvement in the manufacturing sector, although the markets had expected a gain of 1.3%.

Over in the US, Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. The markets were caught off guard by the news, as the estimate stood at -0.1%. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. There was a silver lining courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the Q3 reading of 2.8%.

In a highly anticipated decision, the Federal Reserve pressed the taper trigger for a second month in a row on Wednesday . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernard Bernanke’s last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.

USD/JPY for Friday, January 31, 2014

USD/JPY January 31 at 11:40 GMT

USD/JPY 102.20 H: 102.93 L: 102.11

USD/JPY Technical

• USD/JPY has edged lower in Friday trading. The pair touched a low of 102.30 early in the European session.
• 102.53 has reverted to a resistance line. This is a weak line which was breached earlier in the day. 103.30 is the next line of resistance.
• On the downside, the pair is receiving support at 101.19. Next is the key level of 100.00, which has held intact since November.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.65
• Above: 102.53, 103.30, 104.17, 105.70, 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio has reversed positions on Friday, pointing to gains in short positions. This is consistent with what we are seeing from the pair, as the yen has posted slight gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar moving to higher ground.

The yen has improved as USD/JPY trades slightly above the 102 line. The dollar is under pressure in the European session.

USD/JPY Fundamentals

• 5:00 Japanese Housing Starts. Estimate 13.9%. Actual 18.0%.
• 13:30 US Core PCE Price Index. Estimate 0.1%.
• 13:30 US Employment Cost Index. Estimate 0.4%.
• 13:30 US Personal Spending. Estimate 0.2%.
• 13:30 US Personal Income. Estimate 0.2%.
• 14:45 US Chicago PMI. Estimate 59.8 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 81.1 points.
• 14:55 US Revised UoM Inflation Expectations.
• 18:15 US FOMC Member Richard Fisher Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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