USD/JPY – Yen Loses Ground Despite Strong Japanese Consumer Spending Data

USD/JPY is moving higher in Tuesday trading, as the pair tests the 98 line late in the European session. In economic news,  Japanese Household Spending and Retail Sales both jumped sharply in September. Over in the US, it was another disappointing day, as PPI, Retail Sales and CB Consumer Confidence all missed their estimates. Core Retail Sales was the lone bright spot, as it matched the forecast. As well, the Federal Reserve meets for a two-day policy meeting which begins on Tuesday. The lone Japanese release on Tuesday is Preliminary Industrial Production.

Japanese indicators continue to improve, pointing to an improving Japanese economy. This time it was the turn of consumer spending indicators to shine. Household Spending jumped 3.7%, recovering nicely from a decline of -1.6% the month before. This crushed the estimate of 0.7% and marked a six-month high for the indicator. Retail Sales also looked sharp, climbing 3.1%, compared to a gain of 1.1% in the previous month. This was well above the estimate of 1.9%.

In the US, the grim readings continued on Tuesday. PPI and Retail Sales both declined by 0.1%, missing the estimate of 0.2%. CB Consumer Confidence dropped sharply, from 79.7 to 71.2 points, a six-month low. This was well short of the estimate of 75.7 points. Core Retail Sales managed to match the forecast, rising to 0.4%. The mostly weak figures come on the heels of dismal housing numbers on Monday. If confidence in the US economy starts to weaken, we could see the dollar, which is already under pressure from the major currencies, continue to lose ground.

The markets are carefully monitoring the FOMC policy meeting, which began on Tuesday. Federal Reserve policymakers have indicated that the Fed is unlikely to taper QE in 2013, and weak US releases will only reinforce this sentiment, and tapering could be on hold to March or April of next year. As tapering is bullish for the dollar, the lack of action by the Fed will continue to weigh on the struggling dollar.

USD/JPY for Tuesday, October 29, 2013

USD/JPY October 29 at 13:15 GMT

USD/JPY 97.94 H: 98.00 L: 97.46

USD/JPY Technical

• USD/JPY has moved higher in Tuesday trading. The pair is putting strong pressure on the 98 line early in the North American session.
• The support level of 97.18 has some breathing room as the pair trades at higher levels. This is followed by strong support at the round number of 96.00.
• On the upside, the pair is facing resistance at 98.15. This line has weakened as the dollar pushes higher and could be tested later in the North American session. This line 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 has reversed positions on Tuesday, and is pointing to movement towards long positions. This is not reflected in the movement of the pair, as the dollar has posted gains against the yen. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar continuing to move higher.

The dollar has managed to post gains, despite solid Japanese data and disappointing US numbers. Any further gains by the dollar during the day are likely to be limited.

USD/JPY Fundamentals

• 12:30 US Core Retail Sales. Exp. 0.4%. Actual 0.4%.
• 12:30 US PPI. Exp. 0.2%. Actual -0.1%.
• 12:30 US Retail Sales. Exp. 0.2%. Actual -0.1%.
• 12:30 US Core PPI. Exp. 0.1%. Actual 0.1%.
• 13:00 US S&P/CS Composite-20 HPI. Exp. 12.4%. Actual 12.8%.
• 14:00 US CB Consumer Confidence. Exp. 75.2 points. Actual 71.2 points.
• 14:00 US Business Inventories. Exp. 0.3%. Actual 0.3%.
• 23:50 Japanese Preliminary Industrial Production. Estimate 1.8%.

*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.