USD/JPY – Yen Improves as Weak US Data Continues

The Japanese yen continues to show improvement, as USD/JPY dropped below the 98 line in Monday’s Asian session. The Japanese yen has benefited as US numbers continued to disappoint on Friday. In Monday’s releases, Japanese Revised Industrial Production rose 0.6%, easily beating the estimate of -0.1%. The markets will be keeping an eye on today’s highlight, the US Empire State Manufacturing Index.

Bank of Japan governor Haruhiko Kuroda said on Monday that Japan’s financial system was stable, and that the BOJ could reach its target of 2% inflation in less than two years. He added that the economy is starting to improve, with greater demand domestically as well as from Japan’s trading partners. The BOJ has embarked on an aggressive program to eliminate deflation, and has greatly expanded its quantitative easing program, purchasing JPY7.5 trillion yen of long-term government bonds each month. Meanwhile, the yen was precariously close to the 100 level last week, but has now retracted.

The US released a host of data on Friday, and the grim news continued. After a solid Unemployment Claims reading on Thursday, there was hope that the US would rebound from a string of dismal releases, but the wheels just feel off the cart on Friday. Core Retail Sales and Retail Sales both declined by 0.4%. PPI dropped 0.6%, and UoM Consumer Sentiment wrapped up an awful week. The key consumer indicator came in at 72.3 points, way off the estimate of 79.1 points. The continuing weak numbers are bound to raise serious concerns about the extent of the recovery, as the US has churned out weak numbers since late March. 

The Cyprus bailout agreement has been signed, but is the crisis really over? Eurogroup finance ministers met last Friday and approved a EUR 10 billion loan to Cyprus. Under the agreement, Cyprus will have to kick in EUR13 billion. Back in March, Cyprus was only supposed to add another EUR 7 billion. However, the deal collapsed after Cyprus balked at taxing every bank deposit in the country following a huge outcry on the island. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

USD/JPY for Monday, April 15, 2013

USD/JPY 97.78 H: 98.71 L: 97.56

USD/JPY has moved lower in Monday trading . In the Asian session ,the pair dropped below the 98 line. There is resistance at 98.45. This is followed by 99.57, which saw action last week. On the downside, 97.24 is providing support. This line could face pressure if the yen continues to advance. The next support level is at 96.03, protecting the 96 line.

Current range: 97.24 to 98.45.

Further levels in both directions:

• Below: 97.24, 96.03, 95.27 and 94.59
• Above: 98.45, 99.57, 100, 100.54 and 101.81

OANDA’s Open Position Ratios

USD/JPY ratio is not showing  a lot of movement in Monday trading. This lack of activity is not reflected in the current trend we are seeing from the pair, as the yen has been improving. If the pair continues to show movement, we can expect the ratio to swing into action as well.

After almost touching the 100 line, the yen has flexed some muscle at the expense of the dollar, as the pair trades in the mid-97 range. With only a couple of releases out of the US to start the week, we can expect a fairly uneventful Monday from USD/JPY.

USD/JPY Fundamentals

• 00:30 Japanese BOJ Gov Kuroda Speaks
• 4:30 Japanese Revised Industrial Production. Estimate -0.1%. Actual 0.6%
• 18:15 Japanese BOJ Gov Kuroda Speaks
• 12:30 US Empire State Manufacturing Index. Estimate 7.2 points
• 13:00 US TIC Long-Term Purchases. Estimate 41.3B.
• 14:00 US NAHB Housing Market Index. Estimate 45 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.