USD/JPY – Yen Continues to Hug 99 Line

USD/JPY continues to flirt with the 99 line in Tuesday’s European session. In economic news, Japanese markets are back in action, but there is just one Japanese release on the schedule – Corporate Services Price Index. In the US, the key event of the day is CB Consumer Confidence. As well, FOMC member Esther George will address an event in Chicago.

The markets have settled down after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting last week. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/mth by $10-15 billion. However, the Fed was of the opinion that US economic data, particularly employment numbers, did not justify scaling down QE at this time. After the FOMC Statement, Federal Reserve Bank of St. Louis President James Bullard shed some light on the dramatic move (or lack of) by the Federal Reserve. Bullard said the vote was close, but weaker US numbers led to a decision not to taper. He added that the Fed may go ahead with “small” reductions to QE at its next policy meeting in October.

Overshadowed by the FOMC Statement were excellent US key releases late last week. 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.

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. We’ll get a look at several inflation releases this week, starting with the Corporate Services Price Index later on Tuesday. Recent readings have been above zero, and the markets are expecting a gain of 0.5% for the August release, which would be a multi-year high.

USD/JPY for Tuesday, September 24, 2013

USD/JPY September 24 at 9:10 GMT

USD/JPY 99.06 H: 99.17 L: 98.66

USD/JPY Technical

• USD/JPY is trading just above the 99 line in Tuesday trading. The pair dipped to 0.9873 late in the Asian session but has since bounced back above 99.
• The pair continues to face resistance at 99.45. This is followed by resistance at the all-important 100 level.
• On the downside, USD/JPY is receiving 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 has reversed movement on Tuesday, pointing towards long positions in Tuesday trading. This is reflected in the pair’s current movement, as the dollar has posted slight gains against the yen. 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 continues to trade very close to the 99 level. The US will release key consumer confidence data later in the day, which could impact on the pair if the reading catches the markets by surprise.

USD/JPY Fundamentals

• 13:00 US S&P/CS Composite-20 HPI. Estimate 12.5%.
• 13:00 US HPI. Estimate 0.9%.
• 14:00 US CB Consumer Confidence. Estimate 79.9 points.
• 14:00 US Richmond Manufacturing Index. Estimate 17 points.
• 17:00 US FOMC Member Esther George Speaks. George is hawkish in stance.
• 23:50 Japanese Corporate Services Price Index. Estimate 0.5%.

*Key releases are highlighted in bold

*All release times are GMT

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