USD/JPY – Dollar Firm as US Posts Mixed Data

The US dollar has posted small gains on Friday, as USD/JPY trades in the mid-102 range late in the European session. On the release front, US PPI showed a paltry gain of 0.1%, while the Empire State Manufacturing Index weakened, coming in at 14.7 points. We’ll get a look at consumer sentiment data later in the day. There are no Japanese releases on Friday.

With the US continuing to suffer from low inflation levels, markets expectations have been low for key inflation indicators. On Friday, PPI, the primary gauge of inflation in the manufacturing sector, slipped to 0.1%, down from 0.4% a month earlier. This matched the estimate. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. On the manufacturing front, the Empire State Manufacturing Index plunged to 14.3 points, down from 23.6 points in the previous release. This marked a three-month low and was well of the estimate of 20.3 points.

On Thursday, US Unemployment Claims came in higher than expected. The indicator climbed to 311 thousand, marking a six-week high. The estimate stood at 307 thousand. Employment indicators are being closely scrutinized by analysts, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed. Earlier in the week, JOLTS Job Openings hit its highest level in 13 years, although it too missed expectations.

Japanese GDP contracted in the second quarter by 1.7%, its first decline since 2012. The yen managed to shrug off the bad news, as the markets had expected this figure. Still, negative growth does not bode well for the Japanese currency, which continues to trade above the 102 line. Analysts are pointing to the April tax hike as an important contributor to the weak GDP figure, since it has dampened consumption and hurt growth.

July proved to be a rough month for Japanese manufacturing events, as three manufacturing indicators missed their estimates this week. On Thursday, Core Machinery Orders bounced back from a decline with a gain of 8.8%, but this was way off the forecast of 15.5%. Earlier in the week, Tertiary Industry Activity came in at -0.1%, short of the estimate of a 0.2% gain. Revised Industrial Production dropped 3.4% last month, its steepest fall since October 2012. The weak manufacturing numbers are another indication of weakness in the Japanese economy, which could drag down the yen.

USD/JPY for Friday, August 15, 2014

USD/JPY August 15 at 13:05 GMT

USD/JPY 102.66 H: 102.71 L: 102.45

USD/JPY Technical

• USD/JPY was flat in the Asian session. The pair has edged higher in European trading.
• 102.53 has reverted to a support role as the yen has posted slight losses. 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, 98.84 and 98.09
• Above: 103.07, 104.17 and 105.44 and 107.68

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Friday. This is not consistent with the pair’s movement, as the dollar continues to improve. The ratio has a majority of long positions, indicating trader bias towards the dollar continuing its upward movement.

USD/JPY Fundamentals

• 12:30 US PPI. Estimate 0.1%. Actual 0.1%.
• 12:30 US Core PPI. Estimate 0.2%. Actual 0.4%.
• 12:30 US Empire State Manufacturing Index. Estimate 20.3 points. Actual 14.7 points.
• 13:00 US TIC Long-Term Purchases. Estimate 27.3B. Actual -18.7B.
• 13:15 US Capacity Utilization Rate. Estimate 79.2%. Actual 79.2%.
• 13:15 US Industrial Production. Estimate 0.3%. Actual 0.4%.
• 13:55 US Preliminary UoM Consumer Sentiment. Estimate 82.7 points.
• 13:55 US Preliminary UoM Inflation Expectations.

*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.