USD/JPY – Dollar Edges Lower, Drops Below 99 Level

USD/JPY has edged lower in Monday trading. The pair dipped below the 99 line, as the dollar remains under pressure following the Federal Reserve decision not to taper QE. In economic news, it’s a quiet start to the new week, as the Japanese markets are closed for a holiday. In the US, there is just one economic release, Flash Manufacturing PMI.

The markets continue to try and recover their composure after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting on Wednesday. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/month by as much as $15 billion each month. However, the Fed decided to stay the QE course for now, stating that US economic data was not strong enough to warrant QE tapering at this time. The Fed also downgraded its forecast for the economy, estimating GDP growth for 2013 at 2.0-2.3%, down from 2.3-2.6% in an earlier forecast. It also lowered its outlook for 2014 from 2.9-3.1%, down from 3.0-3.5%. USD/JPY was up about a cent following the Fed announcement.

Overshadowed by the FOMC Statement were some excellent US releases on Thursday. Unemployment Claims came in at 309 thousand, well below the estimate of 331 thousand. Existing Home Sales rose to 5.48 million, crushing the estimate of 5.27 million and posting its best level in over three years. The Philly Fed Manufacturing Index rocketed from 9.3 to 22.3 points, its best showing since May 2011. Perhaps if we’d seen this kinds of numbers a week or two ago, the Fed might have introduced QE tapering. The strong numbers helped the US dollar wipe out the losses it sustained on Wednesday.

In Japan, BOJ Governor Haruhiko Kuroda sounded upbeat about the Japanese economy on Friday, saying that improving economies in the US and Europe would bolster Japanese exports and output and lead to an increase in capital expenditure. The BOJ has embarked on a radical monetary platform, which has included sharp increases to the money base in order to achieve 2% inflation. After years of deflation which have hobbled the economy, there are signs of inflationary trends and stronger economic data, although the 2% inflation target will take some time to reach.

USD/JPY for Monday, September 23, 2013

USD/JPY September 23 at 11:25 GMT

USD/JPY 98.94 H: 99.29 L: 98.86

USD/JPY Technical

• USD/JPY has dipped lower in Monday trading and is trading below the 99 line, after breaking through this level in the Asian session.
• The pair is facing resistance at 99.45. This is followed by resistance at the all-important 100 level.
• On the downside, USD/JPY continues to receive support at 98.43. There is stronger support at 97.83, which has remained intact since late August.
• Current range: 98.43 to 99.45

Further levels in both directions:

• Below: 98.43, 97.83, 97.18 and 96.20
• Above: 99.45, 100, 100.85, 101.66 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio is showing movement towards short positions in Monday trading. This is reflected in the pair’s current movement, as the yen has posted slight gains against the dollar. The ratio is made up of a solid majority of long positions, indicative of a strong trader bias towards the US dollar moving to higher ground.

USD/JPY has started off the week fairly quietly, and this could continue in the North American session. However, the US releases a manufacturing PMI later today, and a reading which surprises the markets could cause some volatility.

USD/JPY Fundamentals

• 13:00 US Flash Manufacturing PMI. Estimate 54.2 points.
• 13:30 US FOMC Member William Dudley Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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