USD/JPY – Yen Pressuring Greenback Ahead of Unemployment Claims

The yen continues to post gains against the US dollar in Thursday trading. In the European session, the pair is trading in the mid-97 range. The markets will have plenty of data to sort through on Thursday. In the US, there are three key releases – Unemployment Claims, Trade Balance and New Home Sales. Over in Japan, we’ll get a look at inflation indicators, highlighted by Tokyo CPI. Strong inflation readings could give the yen a boost.

There was plenty of anticipation leading up to the release of US Non-Farm Payrolls on Tuesday, as the key indicator had been postponed from early October due to the government shutdown. However, the markets were in for a big disappointment, as NFP slipped to 148 thousand in September, compared to 169 thousand in August. This was a six-month low, and well off the estimate of 182 thousand. The US unemployment rate dipped to 7.2%, a five-year low, but this does not point to increased employment, as the participation rate remained at 63.8%, its lowest level since 1978. These figures indicate that the US labor market continues to have difficulty creating new jobs. The markets will be looking for some better news from Unemployment Claims, which will be released later on Thursday.

There was some optimism and relief last week, as the Republicans and Democrats finally reached an agreement last week to reopen the government and raise the debt ceiling, following weeks of fighting in Congress. However, the deal provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. Both sides have agreed to discuss budget issues and try to reach a long-term agreement before December 13. So we could be right back where we started in just a few months. At the same time, the public is angry at lawmakers for creating the crisis, and with congressional elections only a year away, the politicians on Capitol Hill may think twice before plunging the country into another fiscal and political crisis.

The US government is again functioning and a default has been averted, but the agreement hammered out in Congress last week provides short-term relief only, as it raises the debt ceiling until early February and funds the government until mid-January. The underlying budgetary issues remain unresolved, consumer confidence has been shaken and employment numbers are not looking good. Given this situation, the Fed is unlikely to push the taper trigger until early 2014, perhaps not before March or April.

USD/JPY for Thursday, October 24, 2013

USD/JPY October 24 at 12:00 GMT

USD/JPY 97.34 H: 97.61 L: 97.17

USD/JPY Technical

• USD/JPY has posted modest losses on Thursday, as the yen continues to improve.
• The support level of 97.18 remains under pressure and could break if the yen continues to chalk up gains. This is followed by strong support at the round number of 96.00.
• On the upside, 0.9815 is providing resistance. This is followed by strong resistance at 98.92, which is protecting the 99 line.
• Current range: 97.18 to 98.15

Further levels in both directions:

• Below: 97.18, 96.00, 95.06 and 94.20
• Above: 98.15, 98.92, 100, 101.19 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in Thursday trading. This is not reflected in the movement of the pair, as the yen continues to post gains against the dollar. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar reversing direction and moving higher.

The dollar remains under pressure from the yen on Thursday. We can expect some volatility from USD/JPY during the day and into Friday, as the US releases key employment and housing data, and Japan posts inflation numbers.

USD/JPY Fundamentals

• 12:30 US Trade Balance. Estimate -39.4B.
• 12:30 US Unemployment Claims. Estimate 343K.
• 13:00 US Flash Manufacturing PMI. Estimate 52.8 points.
• 14:00 US New Home Sales. Estimate 427K.
• 14:00 US JOLTS Job Openings. Estimate 3.77M.
• 14:30 US Natural Gas Storage. Estimate 80B.
• 23:30 Japanese Tokyo Core CPI. Estimate 0.4%.
• 23:30 Japanese National Core CPI. Estimate 0.7%.
• 23:50 Japanese Corporate Services Price Index. Estimate 0.8%.

*Key releases are highlighted in bold

*All release times are GMT

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