USD/JPY – Yen Slides on Sharp US GDP

The Japanese yen continues to sag, as USD/JPY is trading in the high-102 range. The yen lost close to a cent on Wednesday, as US GDP jumped 4.0%. Taking a look at Thursday’s events, Japanese data was weak, as Average Cash Earnings and Housing Starts disappointed. In the US, Unemployment Claims is today’s highlight. The markets are braced for rise in the number of claims, with an estimate of 303 thousand.

In the US, GDP soared in the second quarter, expanding at an annual rate of 4.0%. This easily beat the estimate of 3.1%. The boost in economic activity was boosted by strong consumer confidence and business activity in Q2. Meanwhile, ADP Nonfarm Payrolls was unable to keep pace. The key employment indicator dropped to 218 thousand, compared to 284 thousand a month earlier. This was well off the estimate of 234 thousand. If the official Nonfarm Payrolls follows suit with a weak reading on Friday, the US dollar could give up its recent gains.

CB Consumer Confidence was outstanding in June. The key indicator jumped to 90.9 points, crushing the estimate of 85.5 points. This was the indicator’s highest level since September 2007. Consumer confidence is closely tracked by analysts since a confident consumer is likely to increase consumption, which is critical for economic growth. The strong reading has helped the dollar posts gains against the retreating yen.

Japanese data continues to struggle this week. Average Cash Earnings slipped to a four-month low, while Housing Starts posted its fourth straight decline. Earlier this week, Preliminary Industrial Production, an important manufacturing release, posted a sharp drop of 3.3% in June. This is the indicator’s sharpest decline since June 2013. There was no relief from Household Spending and Retail Sales, as both consumer spending indicators posted a third straight decline. These figures point to trouble in the economy, as a decrease in consumer spending will likely translate into weaker economic growth and put more pressure on the struggling Japanese yen.

 

USD/JPY for Thursday, July 31, 2014

USD/JPY July 31 at 12:00 GMT

USD/JPY 102.88 H: 102.92 L: 102.72

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
100.00 101.19 102.53 103.07 104.17 105.70

 

  • USD/JPY is showing little activity in the Asian and European sessions.
  • 102.53 has reverted to a support level as the pair trades at higher levels. 101.19 is stronger.
  • 103.07 is an immediate resistance line. 104.17 follows.
  • Current range: 102.53 to 103.07

Further levels in both directions:

  • Below: 102.53, 101.19, 100 and 99.57
  • Above: 103.07, 104.17, 105.70, 106.55

 

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to strong gains in short positions on Thursday. This is consistent with the sharp gains posted by the dollar on Wednesday, which has resulted in the covering of long positions, leading to a higher percentage of open short positions. The ratio continues to have a majority of long positions, indicating strong trader bias towards the dollar continuing to move to higher ground.

 

USD/JPY Fundamentals

  • 1:30 Japanese Average Cash Earnings. Estimate 0.7%. Actual 0.4%.
  • 5:00 Japanese Housing Starts. Estimate -11.2%. Actual -9.5%.
  • 11:30 US Challenger Job Cuts. Actual 24.4%.
  • 12:30 US Unemployment Claims. Estimate 303K.
  • 12:30 US Employment Cost Index. Estimate 0.5%.
  • 13:45 US Chicago PMI. Estimate 63.2 points.
  • 14:30 US Natural Gas Storage. Estimate 92B.

* 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.