USD/JPY – Dollar Climbs to 4-Month Highs Against Sagging Yen

The US dollar continues to gain ground against the Japanese yen, as USD/JPY trades in the mid-103 range early in the North American session. In Japan, All Industries Activities, a minor event, posted a -0.4% decline and missed expectations. In the US, today’s highlight is the Federal Reserve’s policy meetings.

All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting later on Wednesday. Traders are looking for clues as to when the Fed will press the trigger and raise interest rates, but may end up disappointed. US growth numbers have been positive, but job data could be better and inflation remains very low. The Fed’s asset purchase program (QE) is scheduled to wind up in October, and a rate hike appears to be a question of timing.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%.  These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Friday. This will be Janet Yellen’s first appearance as Fed chair at the conference, and will undoubtedly be the star of the show. Yellen is expected to discuss the employment market rather than monetary policy, but the markets will be listening closely for any hints as to an interest rate hike.

USD/JPY for Wednesday, August 20, 2014

USD/JPY August 20 at 13:35 GMT

USD/JPY 103.31 H: 103.40 L: 102.90

USD/JPY Technical

• USD/JPY showed some strength in the Asian session and pushed above the 103 level. The pair edged higher in European trade and is stable in the North American session.
• 103.07 has switched to a support role as the yen continues to weaken. 102.53 is next.
• 104.17 is the next resistance line.
• Current range: 103.07 to 104.17

Further levels in both directions:

• Below: 103.07, 102.53, 101.19 and 100
• Above: 104.17, 105.44, 107.68 and 108.57

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Wednesday, continuing the trend we saw a day earlier. This is not consistent with the pair’s movement, as the dollar has posted gains. The ratio has a majority of long positions, indicating trader bias towards the dollar continuing its upward movement.

USD/JPY Fundamentals

• 4:30 Japanese All Industries Activity. Estimate -0.2%. Actual -0.4%.
• 14:30 US Crude Oil Inventories. Estimate -1.3M.
• 18:00 US FOMC Meeting Minutes.

*Key releases are highlighted in bold

*All release times are GMT

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