USD/JPY – Surging Dollar Pushes Above 118

The Japanese yen has stabilized on Thursday, after suffering sharp losses on Wednesday. In the European session, USD/JPY trade in the low-118 range. The yen has not been at such low levels since August 2007. On the release front, Japanese Flash Manufacturing PMI softened and the BoJ released its monthly report. In the US, it’s a very busy day, with four key indicators – Core CPI, CPI, Unemployment Claims and the Philly Fed Manufacturing Index. Any unexpected readings from these events could translate into some volatility from USD/JPY.

The struggling Japanese economy has officially slipped into recession, as GDP has posted two straight declines. In Q3, GDP declined -0.4%, well below the estimate of 0.5%. Prime Minister Abe responded by delaying an increase in the sales tax to 10%. Abe then surprised the markets by announcing elections halfway through his term. The upcoming election could end up as a referendum on Abenomics, which has involved sharp monetary easing and heavy government spending.

The Federal Reserve released its minutes on Wednesday and there were no clues about the timing of a rate hike. The markets are expecting rates to rise in the second half of 2015, but this will of course depend on economic conditions. With inflation below the Fed target of 2%, there is less pressure to raise rates. The minutes also noted that weak economic outlooks in Europe and Japan are unlikely to have a negative impact on the US economy. Meanwhile, US housing data was a mix on Wednesday. Building Permits was unexpectedly strong, climbing to 1.08M. This beat the estimate of 1.04M and marked a six-month high. Housing Starts could not keep pace, edging lower to 1.01M. The estimate stood at 1.03M.

USD/JPY for Thursday, November 20, 2014

USD/JPY November 20 at 12:45 GMT

USD/JPY 118.25 H: 118.98 L: 117.97

USD/JPY Technical

• USD/JPY posted gains in the Asian session and tested resistance at 118.89. The pair has retracted in European trading.
• 117.94 is a weak support  line. 116.66 is stronger.
• 118.89 is the next line of resistance.
• Current range: 117.94 to 118.89

Further levels in both directions:

• Below: 117.94, 116.66, 115.75, 114.65 and 113.68
• Above: 118.89, 119.83, 120.63 and 121.39

OANDA’s Open Positions Ratio

USD/JPY is pointing to gains in long positions on Thursday, continuing the direction seen a day earlier. This is not consistent with USD/JPY, which is unchanged on the day. The ratio has a majority of long positions, indicative of trader bias towards the dollar moving to higher ground.

USD/JPY Fundamentals

• 1:35 Japanese Flash Manufacturing PMI. Estimate 52.7 points. Actual 52.1 points.
• 5:00 BoJ Monthly Report.
• 12:45 US FOMC Member Daniel Tarullo Speaks.
• 13:30 US CPI. Estimate -0.1%.
• 13:30 US Core CPI. Estimate 0.2%.
• 13:30 US Unemployment Claims. Estimate 286K.
• 14:45 US Flash Manufacturing PMI. Estimate 56.2 points.
• 15:00 US Philly Fed Manufacturing Index. Estimate 18.9 points.
• 15:00 US Existing Home Sales. Estimate 5.16M.
• 15:00 US CB Leading Index. Estimate 0.6%.
• 15:30 US Natural Gas Storage. Estimate -12B.
• 18:30 US FOMC Member Loretta Mester Speaks.

*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.