USD/JPY – Yen Puts Brakes on Recent Slide

The Japanese yen has posted modest gains in Thursday trading, following sharp losses earlier this week. Early in the North American session, USD/JPY is trading in the mid-104 range. In economic news, Japanese manufacturing data looked good, as Core Machinery Orders soared 9.3%. Tertiary Industry Activity also showed improvement in December, and the Corporate Goods Price Index met market expectations.  In the US, there are three key events on the schedule – Core CPI, Unemployment Claims and the Philly Fed Manufacturing Index. As well, Fed chair Bernard Bernanke will deliver a speech in Washington. There are no Japanese releases on Thursday.

Japanese manufacturing and inflation numbers looked solid on Wednesday. Core Machinery Orders sparkled with a 9.3% gain, crushing the estimate of 1.2%. Tertiary Industry Activity bounced back after two straight declines, posting a gain of 0.6%. This was shy of the estimate of 0.8%. On the inflation front, Corporate Goods Price Index posted a healthy gain of 2.5%, easily beating the estimate of 0.4%. The yen shrugged off these strong numbers as USD/JPY remains listless.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten. We’ll get another look at inflation indicators later on Thursday, as the US releases Core CPI and CPI.

US retail sales numbers painted a mixed picture on Tuesday. Retail Sales dropped sharply to 0.2%, down from 0.7% in November. However, this figure matched the forecast. Core Retail Sales took the opposite route, jumping to 0.7%, compared to 0.4% the month before. This easily beat the estimate of 0.4%.

USD/JPY for Thursday, January 16, 2014

USD/JPY January 16 at 13:35 GMT

USD/JPY 104.45 H: 104.92 L: 104.42

USD/JPY Technical

• USD/JPY is showing little movement in Thursday trading. The pair touched a high of 1.0492 in the Asian session but has since retracted.
• 104.17 continues to provide support. This is a weak line which could be face strong pressure if the dollar loses ground. This is followed by a strong support level at 103.30.
• On the upside, 105.70 is the next line of resistance. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
• Current range: 104.17 to 105.70

Further levels in both directions:

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

OANDA’s Open Positions Ratio

USD/JPY ratio continues to point to gains in short positions. This is reflected in what we are seeing from the pair, as the yen has posted modest gains. Long positions have a majority in the USD/JPY ratio, indicating trader bias towards the dollar reversing positions and resuming the rally we saw earlier in the week.

The yen has posted slight gains in Thursday trading. We could see some volatility from the pair in the North American session, as the US releases three key releases, highlighted by Unemployment Claims.

USD/JPY Fundamentals

• 13:30 US Core CPI. Estimate 0.1%.
• 13:30 US CPI. Estimate 0.3%.
• 13:30 US Unemployment Claims. Estimate 327K.
• 13:30 US Treasury Secretary Jack Lew Speaks.
• 14:00 US TIC Long-Term Purchases. Estimate 42.3B.
• 15:00 US Philly Fed Manufacturing Index. Estimate 8.8 points.
• 15:00 NAHB Housing Market Index. Estimate 58 points.
• 15:30 US Natural Gas Storage. Exp. -296B.
• 16:10 US Fed Chair Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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