USD/JPY – Yen Shrugs Off Weak Japanese Manufacturing Data

The Japanese yen has edged higher in Wednesday trading, as USD/JPY trades in the mid-99 range, within striking distance of the critical 100 level. In economic news, Japanese Core Machinery Orders sagged in October, dropping to a three-month low. It’s another quiet day in the US, with no major events on today’s schedule.

Japanese releases continue to struggle this week, which is weighing on the yen. Core Machinery Orders was a major disappointment, declining by 2.1% in October, compared to a sharp gain of 5.4% in September. The markets had expected a better reading, with the estimate standing at -1.8%. This weak result comes on the heels of Tertiary Industry Activity which posted its third decline in the last four releases. Current Account, which is closely linked to currency demand, also looked sluggish, posting its first decline since October 2012. The markets will be hoping for better news from Preliminary GDP, this week’s key event, later on Wednesday. If the indicator does not look sharp, we could see the yen lose more ground against the improved US dollar.

It’s been an unusually quiet week so far in the US, with no major events due for release until Thursday. However, the dollar is managing just fine, riding on the coattails of Friday’s superb Non-Farm Payrolls. The markets had very low expectations from the key indicator, one of the most important economic releases. The estimate for the October release stood at just 121 thousand, as there was concern that the reading would be artificially low due to the government shutdown in October. However, the indicator put those concerns to rest, as the indicator soared to 204 thousand, its highest level in eight months. The outstanding NFP figure bolstered the US dollar against the major currencies, and has increased speculation that the Fed might press the tapering trigger in December. Such talk could bolster the US currency, as a reduction in QE is bullish for the dollar. At the same time, speculation about a scaling down in QE introduces some uncertainty and volatility in the currency markets.

USD/JPY for Wednesday, November 13, 2013

USD/JPY November 13 at 12:45 GMT

USD/JPY 99.42 H: 99.66 L: 99.41

USD/JPY Technical

• USD/JPY has edged lower in Wednesday trading. The pair touched a high of 99.62 late in the Asian session.
• On the downside, 98.92 is the next support line. This is followed by a support level at 98.15.
• On the upside, 100 is the next line of resistance. Will this key level remain firm against the strong US dollar? This line is followed by resistance at 101.19, which has held firm since mid-July.
• Current range: 98.92 to 100.00

Further levels in both directions:

• Below: 98.92, 98.15, 97.18, 96.00, 95.06 and 94.20
• Above: 100, 101.19, 102.53 and 103.30

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions, continuing the trend we have seen all week. This is reflected in the current movement of the pair, as the yen has posted modest gains against the US dollar. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar reversing direction and posting gains at the expense of the yen.

The pair continues to trade at high levels in Wednesday trading. With no major US releases on Wednesday, we are unlikely to see significant movement from the pair during the North American session.

USD/JPY Fundamentals

• 18:01 US 10-year Bond Auction.
• 19:00 US Federal Budget Balance. Estimate -104.3 B.
• 23:50 Japanese Preliminary GDP. Estimate 0.4%.

*Key releases are highlighted in bold

*All release times are GMT

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