USD/JPY: Little Reaction to Weak US CPI

USD/JPY is stable on Tuesday, as the pair trades in the mid-101 range early in the North American session. On the release front, US CPI posted a weak gain of 0.1% last month. Today’s other key release is Existing Home Sales, which will be released later in the day. In Japan, All Industries Activity bounced back in June, posting a respectable of 0.6%.

US inflation numbers continue to struggle. Core CPI posted a paltry gain of 0.1%, shy of the estimate of 0.2%. The key index has looked anemic in 2014, with its highest gain this year at just 0.3%. CPI gained 0.3% last month, matching the forecast. The markets are expecting better news on the housing front, as Existing Home Sales is expected to show strong gains in June.

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.

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. On a positive note, deflation has been eliminated and the economy has displayed stronger levels of growth and inflation.

USD/JPY for Tuesday, July 22, 2014

USD/JPY July 22 at 13:30 GMT

USD/JPY 101.44 H: 101.60 L: 101.33

USD/JPY Technical

• USD/JPY has not showed much activity in the Asian or European sessions. In North American trading, the pair has touched a low of 101.33.
• 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 almost unchanged on Tuesday, continuing the trend seen a day earlier. This is consistent with the lack of movement we are currently seeing from the pair. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar breaking out and moving to higher ground.

USD/JPY Fundamentals

• 4:30 Japanese All Industries Activity. Estimate 0.7%. Actual 0.6%.
• 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
• 12:30 US CPI. Estimate 0.3%. Actual 0.3%.
• 13:00 US HPI. Estimate 0.4%. Actual 0.4%.
• 14:00 US Existing Home Sales. Estimate 4.98M.
• 14:00 US Richmond Manufacturing Index. Estimate 5 points.

*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.