USD/JPY – Slumping Yen Slips to 6-Year Lows

The Japanese yen continues to shrink, as USD/JPY trades just above the 106 line in Tuesday’s European session. The last time the pair was at these levels was in October 2008. Japanese Tertiary Industry Activity continued to sputter, posting a flat reading of 0.0%. The BoJ minutes stated that policymakers were concerned with inflation levels. On Tuesday, we’ll get a look at Japanese Core Machinery Orders, an important manufacturing indicator. In the US, today’s highlight is JOLTS Jobs Openings. The employment indicator has improved over three consecutive releases, and the upward swing is expected to continue, with an estimate of 4.72M.

The BoJ minutes did not contain any surprises, coming on the heels of a policy meeting in which the BoJ unanimously decided to maintain its current monetary policy. Policy makers stated that inflation levels should be carefully assessed as to whether inflation will reach the 2% target in 2015. On an optimistic note, the minutes stated that economic growth and inflation were in line with forecasts.

Japanese GDP was anything but impressive in Q2, posting a decline of 1.6%. This marked the first quarter that the economy has contracted since Q3 of 2012. The sales tax hike in April, which has taken a bite out of economic growth, continued to take its toll in the second quarter as retail sales and household spending has softened. The government signaled last week that it is prepared to increase stimulus to help the economy absorb another sales tax hike in October. Further stimulus could send the sagging yen to even lower levels.

US numbers continue to point to a deepening recovery, but the labor market is showing some signs of trouble. On Friday, the eagerly-anticipated Nonfarm Employment Change crashed to 142 thousand, its lowest gain since January. This surprised the markets, which had expected a gain of 226 thousand. The disappointing release follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims. The markets are hoping for some relief from Tuesday’s JOLTS Jobs Openings, which is expected to improve in the August release.

 

USD/JPY for Tuesday, September 9, 2014

USD/JPY September 9 at 13:15 GMT

USD/JPY 106.26 H: 106.39 L: 105.95

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.07 104.17 105.44 106.85 107.68 108.58

 

  • USD/JPY edged higher in the Asian session, crossing into 106 territory. The pair is stable in the European session.
  • 105.44 has reverted to a support role as the yen continues to lose ground. 104.17 is next.
  • 106.85 is providing resistance. This line has held firm since September 2008.
  • Current range: 105.44 to 106.85

Further levels in both directions:

  • Below: 105.44, 104.17, 103.07 and 102.53
  • Above: 106.85, 107.68. 108.57 and 109.82

 

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Tuesday. This is not consistent with the pair’s current movement, as the dollar has posted small gains. The ratio has a majority of short positions, indicative of trader bias towards the yen reversing direction and moving higher.

 

USD/JPY Fundamentals

  • 3:45 Japanese 30-year Bond Auction. Estimate 1.68%.
  • 5:00 Japanese Consumer Confidence. Estimate 42.3 points. Actual 41.2 points.
  • 5:58 Japanese Preliminary Machine Tool Orders. Actual 35.6%.
  • 11:30 US NFIB Small Business Index. Estimate 95.9 points. Actual 96.1 points.
  • 14:00 US JOLTS Job Openings. Estimate 4.72M.
  • 14:00 US FOMC Member Daniel Tarullo Speaks.
  • 23:50 Japanese Core Machinery Orders. Estimate 4.1%.

*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.