USD/JPY – Flat as Dollar Rally Takes Breather

USD/JPY has posted huge gains in the past week, gaining a remarkable 500 points. The pair has taken a pause on Tuesday, as the pair trades in the mid-113 range early in the North American session. On the release front, Japanese Final Manufacturing PMI improved to 52.4 points. Later in the day, Japanese Monetary Base will be released. In the US, today’s highlight is Trade Balance. The key indicator is expected to show little change, with an estimate standing at -$40.0 billion.

The dollar surged against the yen on Friday, gaining over 300 points. The yen took a tumble after the BoJ surprised the markets with a move to increase monetary stimulus. The BoJ increased the monetary base from JPY 60-70 trillion to 80 trillion per year. The Japanese central bank said that the move was needed to increase inflation, which remains short of the central bank’s target of 2%.

Japanese data was a mix last week. Preliminary Industrial Production sparkled in September, with a gain of 2.7%, compared to a reading of -1.5% a month earlier. The estimate stood at 2.3%. Earlier in the week, Japanese Retail Sales was unexpectedly strong in September, climbing 2.3%, its strongest gain since March and well above the estimate of 0.9%. There has been concern about consumer spending in Japan after the sales tax was raised in April from 5% to 8%. The government plans to increase the tax to 10%, but is wary about hurting the economy, which has been marked by modest growth. Meanwhile, Household Spending, an important consumer spending indicator, fell 5.6% in September, well below expectations.

It was another solid performance from US GDP on Thursday, which posted a strong gain of 3.5% in Q3, ahead of the estimate of 3.1%. Although this was short of the Q2 reading of 4.0%, the two readings mark the strongest six-month gain we’ve seen in ten years. Unemployment Claims increased slightly to 287 thousand, slightly higher than the previous reading of 284 thousand. However, the four-week average remains at multi-year lows, pointing to an improving labor market in the US.

 

USD/JPY for Tuesday, November 4, 2014

USD/JPY November 3 at 12:50 GMT

USD/JPY 113.44 H: 113.78 L: 113.18

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.82 110.68 112.94 113.68 114.65 115.75

 

  • USD/JPY tested resistance at 113.78 early in the Asian session, and is almost unchanged in European trade.
  • 113.68 is a weak resistance line. Will the pair break above this line? 114.65 is stronger.
  • 112.94 is an immediate support level. 110.68 is next.
  • Current range: 112.94 to 113.68

Further levels in both directions:

  • Below: 112.94, 110.68, 109.82 and 108.58
  • Above: 113.68, 114.65, 115.75, 116.66 and 117.94

 

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Tuesday. This is consistent with the lack of movement we are seeing from the pair. The ratio currently is close to even split, indicative of a lack of trader bias towards what direction USD/JPY will take.

USD/JPY Fundamentals

  • 1:35 Japanese Final Manufacturing PMI. Estimate 52.8 points. Actual 52.4 points.
  • 13:30 US Trade Balance. Estimate -40.0B.
  • 15:00 US Factory Orders. Estimate -0.4%.
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 46.6 points
  • All Day – US Congressional Elections.
  • 23:50 Japanese Monetary Base. Estimate 36.2%.

*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.