USD/JPY – Dollar Firm As Unemployment Claims Sparkles

USD/JPY has posted modest gains, as the pair continues to move in an upward direction this week. Late in the European session, the pair is trading at the 101.70 line. On the release front, Japanese Trade Balance softened in June but managed to meet expectations. Later in the day, we’ll get a look at inflation figures, with the markets expecting positive readings for June. In the US, Unemployment Claims looked excellent, dropping to its lowest level in over eight years. New Home Sales will be released later in the day.

Unemployment Claims tumbled last week, as the key indicator fell to 284 thousand, its lowest level since February 2008. This surprised the markets, which had expected a reading of 310 thousand. The strong release continues a string of solid employment data, and the dollar could get a boost from the good news. Earlier in the week, 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 was bit stronger, as it gained 0.3% last month, matching the forecast. On a bright note, Existing Home Sales jumped to 5.04 million, surpassing the estimate of 4.94 million. This was the best showing we’ve seen since October, and follows a disappointing release from Housing Starts, which was published last week.

In Japan, the trade deficit widened to JPY -1.08 trillion, compared to a reading of -0.86 trillion last month. This was a bit better than the estimate of -1.11 trillion. The weak figure is being attributed to the April sales tax increase, which has led to a drop in domestic consumption. In Thursday’s other release, Flash Manufacturing PMI came in at 50.8 points, shy of the estimate of 51.9 points.

Geopolitical tensions are bad news for the markets, which crave stability. With violence continuing in Ukraine and Gaza, nervous investors continue to eye the safe-haven US dollar, so the yen could see some pressure. In Ukraine, the downing of a Malaysian Airlines jet, apparently by pro-Russian separatists, has seriously frayed relations between the West and Russia, which have already been strained since the latter annexed Crimea. Fighting continues between the separatists and Ukrainian forces in Eastern Ukraine. The Europeans are threatening stronger sanctions against Russia, and escalating tensions in eastern Ukraine could shake up the markets. In the Middle East, the fighting in Gaza between Hamas and Israel has intensified, as Israel presses on with a land offensive and casualties rises. Meanwhile, the international community is intensifying efforts to broker a cease-fire, but in the meantime the fighting continues.

USD/JPY for Thursday, July 24, 2014

USD/JPY July 24 at 13:20 GMT

USD/JPY 101.75 H: 101.77 L: 101.42

USD/JPY Technical

• USD/JPY was stable in the Asian session. The pair has posted gains in European trading.
• 102.53 is a strong resistance line.
• 101.19 remains 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 unchanged on Thursday. This is not consistent with the movement of the pair, as the dollar has posted slight gains. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar continuing to move to higher ground.

USD/JPY Fundamentals

• 1:35 Japanese Flash Manufacturing PMI. Estimate 51.9 points. Actual 50.8 points.
• 12:30 US Unemployment Claims. Estimate 310K. Actual 298K.
• 13:45 US Flash Manufacturing PMI. Estimate 57.5 points.
• 14:00 US New Home Sales. Estimate 485K.
• 14:30 US Natural Gas Storage. Estimate 95B.
• 23:30 Tokyo Core CPI. Estimate 2.7%.
• 23:30 Japanese National Core CPI. Estimate 3.6%.
• 23:50 Japanese Corporate Services Price Index. Estimate 3.3%.

*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.