USD/JPY: Under Pressure as US GDP Plunges

The Japanese yen has posted modest gains on Wednesday, as US GDP recorded a sharp decline in the first quarter of 2014. As well, US manufacturing data fell short of expectations. USD/JPY is trading in the mid-101 range late in the European session. In Japan, the Corporate Services Price Index posted a sharp gain and beat the estimate. There are no Japanese releases on Wednesday.

The US dollar finds itself under pressure after a dismal Final GDP reading for Q1. The markets were braced for a decline of 1.8%, but the indicator shocked with a much sharper drop of 2.9%. There was more bad news to follow, as Core Durable Goods Orders declined by 0.1%, its first decline in five months. The estimate stood at 0.3%. Durable Goods Orders looked even worse, coming in at -1.0%, shy of the estimate of -0.1%. Traders should be prepared for the US dollar’s major rivals to gain ground after such a weak GDP release.

US data looked sharp on Tuesday, with strong gains in consumer confidence and housing numbers. CB Consumer Confidence improved to 85.2 points, beating the estimate of 83.6 points. It was the strongest level since December 2007. New Home Sales had a superb reading, jumping to 504 thousand, crushing the estimate of 442 thousand. It was the key indicator’s best showing since August 2008. If upcoming indicators continue to point upwards, we could see the US dollar gain strength.

Earlier in the week, BOJ Governor Kuroda sounded upbeat about the Bank’s quantitative and qualitative easing policy, introduced in April 2013. Kuroda noted that growth had improved and deflation curbed, but that inflation was around 1%, well short of the target of 2%. The BOJ had hoped to reach its inflation target by 2015, but Kuroda acknowledged that this goal would take longer, and pledged that the BOJ would continue its current stance of large-scale monetary easing until the inflation target was reached. There was good news from the inflation front, as CSPI jumped 3.6%, beating the estimate of 3.2%.

USD/JPY for Wednesday, June 25, 2014

USD/JPY June 25 at 12:50 GMT

USD/JPY 101.64 H: 101.95 L: 101.73

USD/JPY Technical

• USD/JPY was stable in the Asian session. The pair has lost ground late in the European session.
• 102.53 is the next resistance line. This is followed by resistance at 103.07, which has held firm since early April.
• 101.19 is providing 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, 103.07, 104.17 and 105.70

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Wednesday. This is not consistent with the movement of the pair, as the yen has posted gains. The ratio continues to be made up of a majority of long positions, indicating trader bias towards the dollar reversing directions and moving higher.

USD/JPY Fundamentals

• 12:30 US Core Durable Goods Orders. Estimate +0.3%. Actual -0.1%.
• 12:30 US Final GDP. Estimate -1.8%. Actual -2.9%.
• 12:30 US Durable Goods Orders. Estimate -0.1%. Actual -1.0%.
• 12:30 US Final GDP Price Index. Estimate 1.3%. Actual 1.3%.
• 13:45 US Flash Services PMI. Estimate 58.6 points.
• 14:30 US Crude Oil Inventories. Estimate -1.2M.

*Key releases are highlighted in bold

*All release times are GMT

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