USD/JPY – Limited Movement as Industrial Production Slips

The Japanese yen has started the week quietly, as USD/JPY trades in the mid-117 range on Monday. On the release front, Japanese releases met expectations. Revised Industrial Production declined by 0.5%, while Consumer Confidence came in at 38.8 points. We are likely to see light trade during the day, as US markets are off for Martin Luther King Day.

Currency markets were in turmoil on Thursday, as the Swiss National Bank abruptly abandoned its cap on the exchange rate between the euro and the franc, which had a floor of 1.20 for EUR/CHF. The cap had been in place since 2011, and the move marks a major policy reversal for the normally conservative Swiss central bank. Market reaction was swift, as the euro dropped some 15% against the franc, as the pair is currently trading at parity.

Why the dramatic move by the Swiss? One reason is an attempt to fight deflation, which is hurting the Swiss economy. As well, with the euro losing value, the SNB has had to increase its euro purchases to keep EUR/CHF within the cap, and the SNB may have finally soured on the common currency. The stunning move indicates that the SNB believes that the ECB will implement quantitative easing at its policy meeting on Thursday and didn’t want to have to prop up the ailing common currency, which will likely lose ground after a QE move.

Overshadowed by the SNB announcement were disappointing US releases. Unemployment Claims surprised with a weak reading of 316 thousand. This was well above the estimate of 299 thousand and was the highest reading since June 2014. However, the first full week of the year often shows a spike in claims, since holiday workers are dismissed, resulting in a higher number of claims. Elsewhere, PPI posted a decline of 0.3%, matching the forecast. Manufacturing data was mixed, as the Empire State Manufacturing Index rose to 10.3 points, while the Philly Fed Manufacturing Index slipped to 6.3 points, its worst showing in 11 months.

USD/JPY for Monday, January 19, 2015

USD/JPY January 19 at 13:45 GMT

USD/JPY 117.43 H: 117.66 L: 116.93

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
113.64 115.56 116.69 117.94 118.69 119.83

 

  • USD/JPY edged lower in the Asian session. The pair has recovered in the European trade.
  • 116.69 is providing strong support.
  • 117.94 is an immediate resistance line. 118.69 is stronger.
  • Current range: 116.69 to 117.94

Further levels in both directions:

  • Below: 116.69, 115.56, 113.64, 112.41 and 110.11
  • Above: 117.94, 118.69, 119.83 and 120.63

 

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Monday. This is not consistent with the pair’s movement, as the yen has posted small losses. The ratio currently has a majority of long positions, indicative of trader bias towards the yen moving higher.

USD/JPY Fundamentals

  • 4:30 Japanese Revised Industrial Production. Estimate -0.5%. Actual -0.5%.
  • 5:00 Japanese Consumer Confidence. Estimate 38.6 points. Actual 38.8 points.

*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.