USD/JPY – Slight Gains Continue as Dollar Presses on 120 Line

USD/JPY continues to post gains, as the pair trades just shy of the 120 level in the North American session. The pair has made slow but steady gains since last week, when it was trading below the 119 line. In economic news, Japan will release Trade Balance, with the markets expecting a smaller deficit for September. In the US, housing numbers were a mix, as Building Permits missed expectations, while Housing Starts rose sharply.

The markets got their first look this week at key data from the US, as housing numbers sent the markets a mixed message. Building Permits dipped to 1.10 million in September, shy of the estimate of 1.16 million. This marked a 6-month low for the key indicator. There was much better news from US Housing Starts, which jumped to 1.21 million in the September report, easily beating the forecast of 1.14 million. There were mixed messages from US releases on Friday as well. UoM Consumer Sentiment, the primary gauge of consumer confidence, jumped to 92.1 points in October, up from 85.7 points. This easily beat the estimate of 88.8 points. At the same time, JOLTS Job Openings slipped to 5.37 million, way off the estimate of 5.77 million. The JOLTS release is especially important as it is watched closely by the Fed and is a factor in its decision-making process regarding monetary policy.

Meanwhile, US manufacturing numbers in October were dismal. The Empire State Manufacturing Index posted its third straight decline, coming in at -11.4 points, missing the forecast of -7.3 points. The Philly Fed Manufacturing Index, a key release, came in at -4.5 points, shy of the estimate of -1.8 points. These figures point to contraction in the US manufacturing sector, which continues to suffer from weak global demand.

China has overtaken Japan as the world’s second largest economy, so when the Asian giant publishes data, the markets listen closely. Chinese GDP dipped to 6.9% in Q3, down from 7.0% in the past two quarters. Still, the markets preferred to view the cup as half full, noting that the forecast called for a gain of 6.8%. In an effort to spur growth, the Chinese central bank has cut interest rates five times since November an increased spending. The effect that China is having on the global economy and markets cannot be emphasized enough, and the Federal Reserve recently pointed at slower Chinese growth as a key factor in deciding not to raise US interest rates. Meanwhile, Chinese Industrial Production slipped to 5.7% in September, short of the estimate of 6.0%.

USD/JPY Fundamentals

Tuesday (Oct. 20)

• 12:30 US Building Permits. Estimate 1.16M. Actual 1.10M.
• 12:30 US Housing Starts. Estimate 1.14M. Actual 1.20M.
• 13:00 FOMC Member William Dudley Speaks.
• 13:15 FOMC Member Jerome Powell Speaks.
• 15:00 Federal Reserve Chair Janet Yellen Speaks.
• 23:50 Japanese Trade Balance. Estimate -0.07T.

USD/JPY for Tuesday, October 20, 2015

USD/JPY October 20 at 15:40 GMT

USD/JPY 119.90 H: 119.96 L: 119.41

USD/JPY Technical

• USD/JPY was steady in the Asian session, and moved upwards in European trading.
• 118.53 has strengthened in support as the pair trades at higher levels.
• 120.40 is an immediate resistance line and could be tested in the North American session.
• Current range: 118.53 to 120.40

Further levels in both directions:

• Below: 118.53, 116.90, 115.90 and 113.86
• Above: 120.40, 121.50, 122.40 and 123.74

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Wednesday, showing a solid majority of long positions (62%), indicative of trader bias towards the US dollar moving to higher ground.

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.