USD/JPY – Higher As Dollar Fights Back

The Japanese yen has enjoyed success against the US dollar in January, but the greenback has reversed directions and posted gains in Tuesday trading. USD/JPY is trading in the mid-103 range in the European session. In Japan, Current Account posted a deficit of 0.05 trillion yen. Economy Watchers Sentiment rose to 55.7 points, a seven-month high which was well above the estimate of 54.2 points. Later in the day, Japan releases the M2 Money Stock. In the US, today’s key events are Retail Sales and Core Retail Sales. The markets are expecting modest gains from both releases.

Japanese Current Account posted a deficit of 0.05 trillion, slightly larger than the estimate of a deficit of 0.02 trillion. Although the monthly deficit was small, there is concern in the markets, since it marks the first time that Japan posted three straight deficits since records have been kept. This is largely due to the weak yen, which has driven up the price of imports. Meanwhile, inflation has risen to the 1% level, but this is still well below the government target of 2.0%.

US employment numbers started 2014 on a positive note, but Friday’s Non-Farm Payrolls was dismal, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand. Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate, which fell to 62.8%, its lowest since 1978. This figure points to a worrying trend of a jobless US recovery.

Friday’s disappointing Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve’s path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next meeting.

USD/JPY for Tuesday, January 14, 2014

USD/JPY January 14 at 11:15 GMT

USD/JPY 103.63 H: 103.75 L: 103.02

USD/JPY Technical

• USD/JPY has posted gains in Tuesday trading. The pair has been moving upwards during the Asian and European sessions, and touched a high of 1.0375.
• 103.30 is the first line of support. This is a weak line and could face strong pressure if the dollar retracts. This is followed by a strong support level at 102.53.
• On the upside, 104.17 is providing the next line of resistance. This is followed by a resistance line at 105.70.
• Current range: 103.30 to 104.17

Further levels in both directions:

• Below: 103.30, 102.53, 101.19 and 100.00
• Above: 104.17, 105.70, 106.85, 107.73 and 108.77

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Tuesday trading, continuing the trend we saw a day earlier. This is reflected in what we are seeing from the pair, as the dollar has posted gains. Long positions have a majority in the USD/JPY ratio, indicating trader bias towards the dollar continuing to move to higher ground.

The dollar has reversed directions and posted gains on Tuesday. We could see further movement from the pair in the North American session, as the US releases key retail numbers later in the day.

USD/JPY Fundamentals

• 12:30 US NFIB Small Business Index. Estimate 93.2 points.
• 13:30 US Core Retail Sales. Estimate 0.4%.
• 13:30 US Retail Sales. Estimate 0.2%.
• 13:30 US Import Prices. Estimate 0.3%.
• 15:00 US Business Inventories. Estimate 0.4%.
• 17:45 US FOMC Member Charles Plosser Speaks.
• 18:20 US FOMC Member Richard Fisher Speaks.
• 22:50 Japanese M2 Money Stock. Exp. 4.5%.

*Key releases are highlighted in bold

*All release times are GMT

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