USD/JPY – Crosses 92 Level after Weak Japanese Data

The Japanese yen continues its slide, as USD/JPY pushed across the 92 line in Friday’s Asian session. The pair continues to post multi-year highs, and has now reached its highest level since June 2010. The yen got no help from Thursday’s Japanese numbers, as Household Spending dropped to a three-month low and the unemployment rate rose slightly. In the US, and the markets will be hoping for some positive news from Friday’s key employment releases – Non-Farm Employment Change and the Unemployment Rate, and the ISM Manufacturing PMI. There are no Japanese releases on Friday.

It hasn’t been a good week for Japanese releases, most of which have looked sluggish. There was more bad news on Friday, as Household Spending declined 0.7%, well below the estimate of a 0.2% decline. This was the third decline in the past four readings, and is a worrying indication of the absence of spending by Japanese consumers, which is critical for a recovery to take hold. The Unemployment Rate rose from 4.1% to 4.2%. The estimate stood at 4.1%. These numbers point to a weak Japanese economy, which is yet to respond to the aggressive economic and monetary steps that the new government has taken, as it attempts to kick-start growth. Deflation continues, and most recent economic indicators have been pointing downwards. The government and Bank of Japan have introduced aggressive easing measures, but the only tangible change so far has been the plunging Japanese yen. In the US, Unemployment Claims were sharply higher, coming in at 368 thousand. This was higher than the estimate of 362 thousand. This week’s US data has been disappointing, and the markets will be hoping to wrap up on a positive note, with the release of Non-Farm Employment Change and the Unemployment Rate later on Friday.

The US Federal Reserve was in the spotlight for much of the week, as the markets were poised to react to any new developments. However, there was not much excitement after the two-day policy meeting wrapped up, as the Fed chose to stay the course. The Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. It noted that economic growth had stalled, but was confident that the pause was a temporary one. This laid to rest speculation that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. As expected, the Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment close to 8%, we will likely be hearing this refrain for the foreseeable future.

USD/JPY for Friday, February 1, 2013

iimag

USD/JPY February 1 at 11:20 GMT

92.09 H: 92.29 L: 91.62

The Japanese yen continues to sag, as USD/JPY has pushed across USD/JPY., The pair is facing resistance at 92.53. This is followed by a stronger line at 93.14. On the downside, there is weak support just below the 92 line, at 91.94. This line could face more activity during the day. The pair is receiving stronger support at 91.30.

• Current range: 91.94 to 92.53.

Further levels in both directions:

• Below: 91.94, 91.30, 91.94, 90.91, 90.23, 89.85 and  89.31
• Above: 92.53, 93.14 and 93.42 and 94.11.

OANDA’s Open Position Ratios

The USD/JPY ratio is quiet, despite the yen continuing to lose ground against the US dollar. The ratio continues to almost evenly split between the long and short components, as trader sentiment remains evenly divided as to where USD/JPY will head next. If the pair continues to push higher, we can expect some movement in the ratio as well.

The yen has had a week to forget, as it continues to slide to multi-year lows. With the markets digesting Friday’s weak Japanese numbers, and the US releasing key employment and manufacturing data later in the day, we can expect the volatility to continue.

USD/JPY Fundamentals

• 13:30 US Unemployment Rate. Estimate 7.8%.
• 13:30 US Non-Farm Employment Change. Estimate 161K.
• 13:30 US Average Hourly Earnings. Estimate 0.2%.
• 13:30 US FOMC Member William Dudley Speaks.
• 14:00 US Final Manufacturing PMI. Estimate 56.1 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 71.4 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US ISM Manufacturing PMI. Estimate 50.8 points.
• 15:00 US Construction Spending. Estimate 0.6%.
• 15:00 US ISM Manufacturing Prices. Estimate 56.3 points.
• All Day: US Total Vehicle Sales. Estimate 15.2M.

*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.