USD/JPY – Yen Lower Ahead of Key US Releases

USD/JPY is on the move upwards in Friday trading. The pair is trading in the mid-99 range in the European session. On Wednesday, the dollar tumbled after the minutes from the most recent Federal Reserve policy meeting indicated that policymakers were split on scaling back QE. In economic news, US Unemployment Claims disappointed, coming in way above expectations. In Japan, there were no surprises from the BOJ, which left its current monetary policy unchanged. Revised Industrial Production looked sharp, posting a gain of 1.9%. On Friday, the US releases two key events – PPI and UoM Consumer Confidence.

At the end of a policy meeting on Thursday, the Bank of Japan sounded cautiously optimistic about the economy, and reiterated that it would use quantitative and qualitative monetary easing to achieve an inflation level of 2% .The BOJ did not adjust its aggressive monetary policy, which it started back in April. At that time, the BOJ said it planned to pump JPY 130 trillion into the economy within two years, and committed to doubling the monetary base to JPY 270 trillion by the end of 2014. These measures have sent the yen tumbling to multi-year lows, but the economy has been slow to respond to the monetary shock therapy. Lately, however, economic indicators have shown improvement, including inflation indicators, which have pointed upwards.

This week’s Japanese releases have been positive, for the most part. Tertiary Industry Activity climbed to 1.2%, its best performance since February. The estimate stood at 0.9%. There was more good news from the Corporate Goods Price Index, which jumped from 0.6% to 1.2%, matching the forecast. This is the inflation index’s sharpest rise since January 2012, and points to inflation in the economy. One of the foremost aims of the country’s monetary policy has been to stamp out deflation, so the CGPI reading is certainly welcome news. The Consumer Confidence release was not as sharp, falling from 45.7 points to 45.3, well off the estimate of 44.3. There was more good news on Wednesday, as Core Machinery Orders, an important manufacturing release, jumped 10.5% in June, crushing the estimate of 1.9%. If economic indicators continue to point upwards, market sentiment will be more positive about the Japanese economy, which could prop up the yen.

 

USD/JPY for Friday, July 12, 2013

Forex Rate Graph 21/1/13
USD/JPY July 12 at 10:50 GMT

USD/JPY 99.40 H: 99.42 L: 98.67

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
97.18 97.83 98.43 99.57 100.00 100.85

 

USD/JPY was steady in the Asian session, trading close to the 99 line. The pair has moved higher in the European session. USD/JPY is facing resistance at 99.57. This is a weak line, and could be tested if the dollar continues to gain ground. The critical 100 line, which has been busy in July, is the next resistance line. Given the volatility we are seeing from the pair, this line cannot be considered safe. On the downside, the pair is receiving support at 98.43. This is followed by a support level at 97.83, which was last tested in late June.

Current range: 97.83 to 98.43

 

Further levels in both directions:

  • Below:  98.43, 97.83, 97.18 and 0.9620
  • Above: 99.57, 100.00, 100.85, 101.66 and 102.52

 

OANDA’s Open Positions Ratio

USD/JPY ratio has reversed directions and is moving towards long positions in the Friday session. This is consistent with the pair’s current movement, as the dollar has posted gains at the expense of the yen. Long positions continue to dominate the open positions, indicating that trader sentiment is biased in favor of the dollar continuing to move upwards.

 The US dollar is pointing upwards on Friday, but has a long way to go before making up for Wednesday’s huge losses against the yen. With the US releasing key inflation and consumer confidence numbers later on Friday, so we could see further volatility from USD/JPY before the week is out.

 

USD/JPY Fundamentals

  • 4:30 Japanese Revised Industrial Production. Estimate 2.0%. Actual 1.9%.
  • 5:00 BOJ Monthly Report.
  • 12:30 US PPI. Estimate 0.5%.
  • 12:30 US Core PPI. Estimate 0.2%.
  • 13:55 US Preliminary UoM Consumer Sentiment. Estimate 85.3 points.
  • 13:55 US Preliminary UoM Inflation Expectations. Estimate 3.1%.
  • 15:00 US FOMC Member James Bullard Speaks.

 

*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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.