USD/JPY – Dollar Punches Past 120 on Strong Employment, Housing Data

USD/JPY has posted gains on Thursday, continuing the upward trend we’ve seen all week. In the North American session, the pair is trading at 120.40. In economic news, there are no Japanese releases on Thursday. Over in the US, Unemployment Claims beat expectations for a second straight week, coming in at 255 thousand. On the housing front, Existing Home Sales impressed with a strong surge, improving to 5.55 million, well above expectations. USD/JPY responded to the news with gains, as the pair pushed above the 120 level.

US releases looked sharp on Thursday, as Unemployment Claims, a key release, came in at 259 thousand, beating the estimate of 266 thousand. This was slightly higher than the previous reading of 255 thousand, but marked the third straight week that the indicator beat the forecast. The four-week moving average of claims, which reduces the volatility of the weekly jobless reports, is currently at its lowest level since 1973. These figures point to a stronger labor market, but the next big test comes in early November, with the publication of Nonfarm Payrolls. Meanwhile, Existing Housing Sales had a banner September, improving to 5.55 million, crushing the estimate of 5.38 million. We’ll get a look at additional housing indicators next week.

Recent US data has not been has strong as hoped, with key numbers sending a mixed message about the health of the economy. This has reduced the likelihood of a rate hike by the Federal Reserve before the end of 2015. The markets remain frustrated about the Fed’s lack of communication with the markets, as FOMC members continue to send out contradictory messages about the Fed’s plans. Still, an improvement in US numbers, especially employment and consumer indicators, could quickly revive speculation about a rate hike and boost the US dollar. Next week promises to be interesting, as the Federal Reserve issues a policy statement after its meeting. This will be followed by the release of the Advance GDP report, a market-mover event.

Japan’s trade deficit widened in September to JPY 0.36 trillion, well above the estimate of JPY 0.07 trillion. The weak figure points to a drop in Japanese exports, and the country may be headed to a recession in the third quarter. This has raised speculation that the BOJ may implement additional stimulus. Further monetary easing by the BOJ would likely push the struggling yen downwards.

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

Thursday (Oct. 22)

• 12:30 US Unemployment Claims. Estimate 266K. Actual 255K.
• 13:00 US HPI. Estimate 0.4%. Estimate 0.3%.
• 14:00 US Existing Home Sales. Estimate 5.38M. Actual 5.55M.
• 14:00 US CB Leading Index. Estimate 0.0%. Actual -0.2%.
• 14:30 US Natural Gas Storage. Estimate 89B. Actual 81B.

USD/JPY for Thursday, October 22, 2015

USD/JPY October 22 at 15:15 GMT

USD/JPY 120.39 H: 120.46 L: 119.61

USD/JPY Technical

• USD/JPY was steady in the Asian and European sessions. The pair has posted gains in North American trade.
• 118.53 is a strong support level.
• On the upside, 120.40 was tested earlier and remains under strong pressure. This line could break during 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 almost unchanged on Thursday. Long positions continue to command a solid majority of long positions (56%), indicative of trader bias towards the US dollar continuing to move 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.