USD/JPY – Yen Firm As Japanese Inflation Jumps

USD/JPY continues to point downwards, as the pair trades slightly above the 102 line early in Friday’s European session. The yen received some help from excellent Japanese inflation data, as Tokyo Core CPI jumped and National Core CPI met expectations. Today’s US highlight is UoM Consumer Sentiment. The markets are expecting an improvement in the March release. The sole Japanese release on Friday, All Industries Activity, fell short of market expectations.

Stronger inflation as been a cornerstone of Japan’s monetary policy, and inflation indicators continue to point upwards. Tokyo Core CPI, the country’s primary inflation gauge, climbed 2.7% in March, just shy of the estimate of 2.8%. This marked the indicator’s biggest gain since 1992. National Core CPI also looked strong, with a gain of 1.3%, matching the forecast. With inflation well on its way towards the BOJ target of 2.0%, more attention is being given to Japan’s staggering debt of over $10 trillion, more than double the size of the country’s GDP.

Japan’s trade deficit ballooned in March, jumping to -1.71 trillion yen, well above the estimate of -1.27 trillion. Besides weighing on the yen, the weak figure has raised speculation that the Bank of Japan may have to step in with further easing, as the economy has softened. Consumer consumption could drop as the recent sales tax hike weighs on consumers, and the BOJ could be forced into action as early as June or July. As well, China has been experiencing a slowdown, which bodes poorly for Japanese exports.

On Thursday, key US releases pointed in both directions. Unemployment Claims jumped to 329 thousand, its highest level since mid-February. This was much higher than the estimate of 309 thousand. There was much better news from the manufacturing front, as Core Durable Goods Orders jumped 2.0% in March, crushing the estimate of 0.6%. This was the key indicator’s best showing since September 2012. Durable Goods Orders kept up the fast pace with a sharp gain of 2.6%, beating the estimate of 2.1%.

USD/JPY for Friday, April 25, 2014

USD/JPY April 25 at 10:45 GMT

USD/JPY 102.13 H: 102.50 L: 102.12

USD/JPY Technical

• USD/JPY has moved lower in Friday trade, as the pair’s downward trend continues.
• 102.53 is a weak resistance line. There is stronger resistance at 103.07.
• 101.19 continues to provide strong support.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.97.
• Above: 102.53, 103.30, 104.17, 105.70 and 106.85.

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in Friday trading. This is not consistent with the pair’s movement, as the yen continues to post gains. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar reversing directions and moving upwards.

The yen continues to improve slowly but surely against the US dollar. USD/JPY has edged lower in the European session, with the 102 line in striking distance.

USD/JPY Fundamentals

• 4:30 Japanese All Industries Activity. Estimate -0.5%. Actual -1.1%.
• 13:45 US Flash Services PMI. Estimate 56.2 points.
• 13:55 US Revised UoM Consumer Sentiment. Estimate 83.2 points.
• 13:55 US Revised UoM Inflation Expectations.

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