USD/JPY – Dollar Rallies Following Fed Statement

The Japanese yen has fallen sharply, as USD/JPY has climbed close to 200 points in the past two days. The pair is close to the 109 line, as the yen trades at its lowest levels in six years. On the release front, US inflation numbers remain weak, as Core CPI slipped to -0.2% last month. The Federal Reserve will release a statement following its policy meeting. In Japan, today’s sole event is a speech by BoJ Governor Haruhiko Kuroda in Tokyo, In the US, Unemployment Claims improved to 280 thousand, but Building Permits softened last month. We’ll get a look at the Philly Fed Manufacturing Index later in the day. As well, Fed Chair Janet Yellen will speak in Washington.

US Unemployment Claims has looked sluggish over the past two readings, but that changed on Thursday, as the key indicator sparkled, dropping to 280 thousand, down sharply from 315 thousand in the previous reading. The estimate stood at 312 thousand. Building Permits was not as strong, dipping to 1.00M. This was shy of the estimate of 1.04M.

USD/JPY gained over to 100 points on Wednesday following the Federal Reserve statement. The Fed statement reaffirmed that interest rates would remain ultra-low for a “considerable time” after the asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.

US inflation data was worse than expected on Wednesday. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation continues to be a concern and could delay an interest rate hike in 2015.

Will the United Kingdom remain united on Friday? It’s anyone’s guess as Scottish voters cast their ballots in a historic referendum on independence on Thursday. The most recent polls are pointing to a close vote, with many voters still undecided. If voters do choose to secede from the UK, this would create plenty of questions and uncertainty, including what currency an independent Scotland would use and how the national debt would be divided. A vote to split up the UK could lead to turmoil in the markets and weigh heavily on the markets. Traders should treat the referendum as a market-mover, as a vote in favor of independence could have negative repercussions for the markets.

USD/JPY for Thursday, September 18, 2014

USD/JPY September 18 at 13:05 GMT

USD/JPY 108.77 H: 108.96 L: 108.37

USD/JPY Technical

• USD/JPY has been breaking through resistance lines as  the pair moves sharply higher. The pair posted gains in the Asian session and touched a high of 108.96 in European trading.
• 108.58 is providing weak support. 107.68 is stronger.
• 109.82 is a strong resistance line.
• Current range: 106.85 to 107.68

Further levels in both directions:

• Below: 108.58, 107.68,  106.85, 105.44 and 104.17
• Above: 109.82, 110.68, 112.48, 113.68 and 114.65

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Thursday, reversing the trend that has marked the ratio all week. This is consistent with the pair’s movement, as the dollar continues to climb higher. The ratio has a majority of short positions, indicative of trader bias towards the yen reversing directions and moving to higher ground.

USD/JPY Fundamentals

• 6:35 BoJ Governor Haruhiko Kuroda Speaks.
• 12:30 US Building Permits. Estimate 1.04M. Actual 1.00M. 
• 12:30 US Unemployment Claims. Estimate 312K. Actual 280K.
• 12:30 US Housing Starts. Estimate 1.04M. Actual 0.96M.
  
• 12:45 US Federal Reserve Chair Janet Yellen Speaks.
• 14:00 US Philly Fed Manufacturing Index. Estimate 22.8 points.
• 14:30 US Natural Gas Storage. Estimate 91B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.