USD/JPY: Steady on Mixed US Data

USD/JPY has edged lower on Thursday, as the pair trades in the mid-101 range late in the European session. On the release front, US Unemployment Claims enjoyed another strong week, but Building Permits softened in June. Later in the day, the Philly Fed Manufacturing Index will be released. In Japan, the BOJ will release the minutes of this week’s monetary policy meeting.

US Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. At the same time, the housing sector is struggling, and Building Permits fell to 0.96 million, its lowest level since January. The markets had expected a much stronger reading, with an estimate of 1.04M. Housing Starts followed suit, coming in at 0.89 million, compared to an estimate of 0.89 million.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

Recent US inflation numbers have been weak, so the markets were pleasantly surprised with the June release of the Producer Price index, the primary gauge of inflation in the manufacturing sector. The index improved to 0.4%, beating the estimate of.0.2%. Core PPI, which excludes volatile items, posted a weak gain of 0.2%, matching the estimate. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, if inflation data continues to beat expectations, there will put more pressure on the Fed to raise rates.

At a policy meeting this week, the Bank of Japan opted to hold course with its current monetary easing, and the minutes will be released later on Thursday. Any unexpected dissensions amongst policymakers in the minutes could have an impact on USD/JPY. Under current monetary policy, the money base has been increasing at an annual pace of 60-70 trillion yen. This has led to a severe weakening of the yen, so traders can expect the currency to remain below the 100 level, absent unexpectedly strong data out of Japan.

USD/JPY for Thursday, July 17, 2014

USD/JPY July 17 at 13:15 GMT

USD/JPY 101.47 H: 101.66 L: 101.40

USD/JPY Technical

• USD/JPY edged lower in the Asian session. The pair is unchanged in European trading.
• 102.53 is the next resistance line.
• 101.19 is an immediate support line. There is stronger support at 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 to gains in short positions on Thursday, continuing the trend we’ve seen throughout the week. This is consistent with the pair’s movement, as the yen has edged lower. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar moving higher.

USD/JPY Fundamentals

• 12:30 US Building Permits. Estimate 1.04M. Actual 1.04M.
• 12:30 US Unemployment Claims. Estimate 310K. Actual 302K.
• 12:30 US Housing Starts. Estimate 1.02M. Actual 0.89M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 15.6 points.
• 14:30 US Natural Gas Storage. Estimate 99B.
• 23:50 BOJ Monetary Policy Meeting Minutes.

*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.