USD/JPY – Stable as Durable Goods Sets Record

USD/JPY continues to trade at high levels on Tuesday, with the pair trading just below the 104 line. In Japan, the Services Producer Price Index posted an impressive 3.7% gain, matching the forecast. Over in the US, Core Durable Goods declined by 0.8%, but Durable Goods Orders set a monthly record with a huge jump of 22.6%. Later in the day, we’ll get a look at CB Consumer Confidence.

Japanese inflation levels continue to post strong numbers, as the fight against deflation has been one of the government’s economic success stories. The Services Producer Price Index, which measures corporate inflation, posted a sharp gain of 3.7%, after two straight gains of 3.6%. The markets are expecting more positive news from additional inflation indicators later in the week.

US durables painted a mixed picture on Tuesday. Core Durable Goods Orders, a key indicator, came in at -0.8%, its worst showing in 2014. This was nowhere near the estimate of +0.5%. At the same time, Durable Goods Orders stunned the markets with a record gain of 22.6%. The reason? A huge increase in the purchase of passenger planes in July. USD/JPY has not reacted to the durable goods releases.

Financial leaders and central bankers met at Jackson Hole for a conference late last week, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, however, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the Bank of Japan and the Fed, as the Fed is winding up QE, while the BOJ could decide to increase stimulus to the Japanese economy.

USD/JPY for Tuesday, August 26, 2014

USD/JPY August 26 at 13:00 GMT

USD/JPY 103.89 H: 104.01 L: 103.84

USD/JPY Technical

• USD/JPY edged lower in the Asian session, dropping below the 104 line. The pair is unchanged in the European session.
• 103.07 is providing strong support.
• On the upside, 104.17 is under strong pressure. Will the pair break through this barrier? There is stronger support at 105.44.
• 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 Tuesday. This is consistent with the pair’s movement, as the yen has posted gains. The ratio has a majority of short positions, indicative of trader bias towards the yen continuing to gain ground.

USD/JPY Fundamentals

• 12:30 US Core Durable Goods Orders. Estimate +0.5%. Actual -0.8%.
• 12:30 US Durable Goods Orders. Estimate 7.4%. Actual 22.6%.
• 13:00 US HPI. Estimate 0.3%. Actual 0.4%
• 13:00 US S&P/CS Composite-20 HPI. Estimate 8.2%. Actual 8.1%.
• 14:00 US CB Consumer Confidence. Estimate 89.1 points.
• 14:00 US Richmond Manufacturing Index. Estimate 8 points.

*Key releases are highlighted in bold

*All release times are GMT

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