USD/JPY: Dollar Firm on Yellen Testimony

USD/JPY has edged higher on Wednesday, as the pair trades in the high-101 range late in the European session. On the release front, the BOJ released its monthly report, a minor event. In the US, today’s US highlight is PPI, with the markets expecting a small gain of 0.2% for the June release.

The dollar responded positively to Fed chair Yellen’s testimony before a Senate committee on Tuesday. Yellen stated that given current economic conditions, monetary stimulus was still required, but rates could increase sooner than expected if inflation and job numbers improved more quickly than forecast. The markets were quick to give a thumbs-up to the prospect of earlier rate increases, and EUR/USD continues to lose ground. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

US retail sales releases, the primary indicators of consumer spending, marked the first key events of the week. Retail Sales slipped to 0.2%, well off the estimate of 0.6%. There was better news from Core Retail Sales, which excludes the most volatile items included in Retail Sales. The indicator improved to 0.4%, a three-month high. This was just shy of the estimate of 0.5%. There was excellent news from the manufacturing sector, as the Empire State Manufacturing Index jumped to 25.6 points, its third straight rise.

In Japan, the week started on a positive note as Revised Industrial Production bounced back in June with a gain of 0.7%, beating the estimate of 0.5%. Late last week, Japanese manufacturing numbers was a mix. Core Machinery Orders plunged 19.5%, its third decline in four readings. At the same time Tertiary Industry Activity bounced back from a sharp decline in May, posting a gain of 0.9%. However, the markets had expected a much stronger gain of 1.9%. There was good news on the inflation front, as the Corporate Goods Price Index continues its impressive upward trend in the second quarter. The index improved to 4.6%, edging past the estimate of 4.5%.

USD/JPY for Wednesday, July 16, 2014

USD/JPY July 16 at 12:35 GMT

USD/JPY 101.77 H: 101.79 L: 101.67

USD/JPY Technical

• USD/JPY has shown little change in the Asian and European sessions.
• 102.53 is the next resistance line.
• 101.19 is providing support. There is stronger support at the round number of 100, which has held firm since November.
• 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 pointing to gains in short positions on Wednesday, continuing the direction seen a day earlier. This is not consistent with the pair’s movement, as the yen has edged lower. The ratio is made up of a large majority of long positions, indicating strong trader bias towards the dollar continuing its upward movement.

USD/JPY Fundamentals

• 5:00 BOJ Monthly Report.
• 12:30 US PPI. Estimate 0.2%.
• 12:30 US Core PPI. Estimate 0.2%.
• 13:00 US TIC Long Term Purchases. Estimate 27.4B.
• 13:15 US Capacity Utilization Rate. Estimate 79.4%.
• 13:15 US Industrial Production. Estimate 0.4%.
• 14:00 US Federal Reserve Chair Janet Yellen Testifies Before House Financial Services Committee.
• 14:00 US NAHB Housing Market Index. Estimate 51 points.
• 14:30 US Crude Oil Inventories. Estimate -2.1M.
• 16:00 US FOMC Member Richard Fisher Speaks.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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