USD/JPY: Yen Softer on Japanese Tankan Indices

USD/JPY has posted modest gains on Tuesday, as the pair trades in the high-101 range late in the European session. On the release front, the Tankan Manufacturing and Non-Manufacturing Indices both softened in May, pointing to decreased economic activity. In the US, today’s highlight is ISM Manufacturing PMI, with the markets expecting a strong reading in June.

The Tankan indices are key indicators of the health of the Japanese economy, and the May data was disappointing. Tankan Manufacturing Index slipped to 12 points, a three-month low. The Tankan Non-Manufacturing Index dropped to 19 points, down from 24 points a month earlier. This reading matched the estimate. As well, Japanese Average Cash Earnings posted a respectable gain of 0.8%, matching the forecast.

In the US, the week started out in impressive style, as Pending Home Sales jumped 6.1%, crushing the estimate of 1.4%. This was the strongest gain since May 2013. US housing numbers were excellent last month, as New Home Sales and Existing Home Sales both beat their estimates. The dollar managed to weather a dismal GDP in Q1, so strong numbers this week could give a nice boost to the currency.

US Final GDP in Q1 was much worse than expected, but the dollar managed to weather the storm against most major currencies. More recent releases have looked better, notably housing data and consumer confidence. The markets are keeping a close eye on Wednesday’s ADP Nonfarm Payrolls, which precedes the official Nonfarm Payrolls. The latter is one of the most important economic indicators, so the ADP release could be a harbinger of what to expect from Nonfarm Payrolls at the end of the week.

 

USD/JPY for Tuesday, July 1, 2014

USD/JPY July 1 at 12:45 GMT

USD/JPY 101.54 H: 101.59 L: 101.29

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 101.19 102.53 103.07 104.17

 

  • USD/JPY edged higher in the Asian session and is unchanged in European trading.
  • 102.53 remains a strong resistance line.
  • On the downside, 101.19 is an immediate support line. The next support level is the round number of 100, which has held firm since November.
  • Current range: 101.19 to 102.53

Further levels in both directions:

  • Below: 101.19, 100.00, 99.57 and 98.97
  • Above: 102.53, 103.07, 104.17 and 105.70

 

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing upwards in Tuesday trade. This is consistent with the movement we’re seeing from the pair, as the yen has softened against the dollar. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar continuing to move to higher levels.

 

USD/JPY Fundamentals

  • 1:30 Japanese Average Cash Earnings. Estimate 0.8%. Actual 0.8%.
  • 1:35 Japanese Final Manufacturing PMI. Estimate 51.5 points.
  • 12:00 Treasury Secretary Jack Lewis Speaks.
  • 13:45 US Final Manufacturing PMI. Estimate 57.5 points.
  • 14:00 US ISM Manufacturing PMI. Estimate 55.6 points.
  • 14:00 US Construction Spending. Estimate 0.5%.
  • 14:00 US IBD/TIPP Economic Optimism. Estimate 48.9 points.
  • 14:00 US ISM Manufacturing Prices. Estimate 60.0 points.
  • All Day – US Total Vehicle Sales. Estimate 16.5M.

*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.