USD/JPY: Yen Calm in Thin Holiday Trade

USD/JPY is showing little movement on Monday, as the pair trades in the mid-101 range early in the North American session.  On the release front, it’s a very quiet day, with Japanese markets closed for a holiday. As well, there are no US events on the schedule.

On Friday, US Consumer Sentiment remained steady at 81.3 points, but this was well below the estimate of 83.5 points. A day earlier, 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. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, improving employment data will put more pressure on the Fed to raise rates.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill last week. 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 Federal Reserve’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 trimming the program since last December, when it stood at $85 billion/month. 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.

At a policy meeting last week, the Bank of Japan opted to hold course with its current monetary easing. 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 above the 100 level, absent unexpectedly strong data out of Japan.

USD/JPY for Monday, July 21, 2014

USD/JPY July 21 at 14:25 GMT

USD/JPY 101.32 H: 101.38 L: 101.19

USD/JPY Technical

• USD/JPY edged lower in the Asian session but recovered in European trading. The pair is unchanged early in the North American session.
• 102.53 continues to provide strong resistance.
• 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 almost unchanged on Monday. This is consistent with the lack of movement we’re seeing from the pair. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar moving higher.

USD/JPY Fundamentals

• There are no Japanese or US releases on Monday.

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.