USD/JPY – Higher as Japanese Inflation Slips

The Japanese yen has posted gains on Tuesday, as USD/JPY trades in the mid-119 range in the European session. Late Monday, Japanese corporate inflation weakened, as Services Producer Price Index dipped to 3.4%. There are no Japanese releases on Tuesday. In the US, Federal Reserve head Janet Yellen will testify before the Senate Banking Committee. As well, we’ll get a look at the CB Consumer Confidence report. The markets are expecting a strong reading, with a forecast of 99.6 points.

The markets will be keeping a close eye on Federal Reserve chair Janet Yellen, who testifies before the Senate Banking Committee later on Tuesday. Last week’s Fed minutes were dovish in stance, as policymakers expressed concern about a mid-year rate hike hurting the US recovery. What will be Yellen’s take on a rate hike? If Yellen does provide any hints in this regard, we could see some movement from USD/JPY.

Earlier in the week, BOJ minutes indicated that some BOJ policymakers were concerned about the pace of the BOJ’s monetary easing scheme, which involves increasing base money by 80 trillion yen/year. As inflation remains at low levels, there is concern that the BOJ’s inflation target may not be realized. The BOJ’s radical easing program has ravaged the yen, which continues to trade close to the 120 level.

US releases started the week on a sour note, as Existing Home Sales slipped to 4.82 million in January, well off the estimate of 5.03 million. This marked a 9-month low for the key indicator. We’ll get a look at New Home Sales on Wednesday. Late last week, US key numbers were mixed. Unemployment Claims rebounded strongly with a sharp drop of 283 thousand, compared to 304 thousand a week earlier. This easily beat the estimate of 293 thousand. The news was not as good from the Philly Fed Manufacturing Index, which slipped to 5.2 points, down from 6.3 points and a third straight drop. The markets had expected a reading of 8.8 points.

USD/JPY for Tuesday, February 24, 2015

USD/JPY February 24 at 12:15 GMT

USD/JPY 119.55 H: 119.59 L: 118.87

USD/JPY Technical

• USD/JPY has posted slight gains in the Asian and European sessions.
• 118.69 has strengthened in support as the pair trades at higher levels. 117.49 is stronger.
• 119.83 is a weak resistance line. Will the pair break through this line during the day? 119.83 is stronger.
• Current range: 118.69 to 119.83

Further levels in both directions:

• Below: 118.69, 117.49, 116.69, 115.56 and 113.83
• Above: 119.83, 120.63, 121.69 and 122.19

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Tuesday. This is not consistent with the pair’s movement, as the yen has lost ground. The ratio has a majority of long positions, indicative of trader bias towards the US dollar continuing to move to higher ground.

USD/JPY Fundamentals

• 14:00 US S&P/Composite-20 HPI. Estimate 4.5%.
• 14:45 US Flash Services PMI. Estimate 54.5 points.
• 15:00 US CB Consumer Confidence. Estimate 99.6 points.
• 15:00 US Federal Reserve Janet Yellen Testifies.
• 15:00 US Richmond Manufacturing Index. Estimate 7 points.

*Key releases are highlighted in bold

*All release times are GMT

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