USD/JPY – Yen Softens on Mixed Tankan Data

USD/JPY has posted gains on Monday, following huge losses last week as the yen rebounded. In the European session, the pair is trading just shy of the 119 line. On Sunday, Prime Minister Shinzo Abe’s Liberal Democratic party swept to victory in parliamentary elections. On the release front, the all-important Tankan releases were mixed. In the US, there are no major events to start off the week. Empire State Manufacturing Index looked awful, slipping to -3.6 points. Later in the day, we’ll get a look at Industrial Production. Both indicators are expected to improve, which could give the US dollar a boost. There are no Japanese releases on Monday.

Japan’s ruling Liberal Democratic Party registered a convincing election victory, giving Prime Minister Abe a comfortable majority in the lower house of parliament. However, winning the election is likely to be the easy part, as the economy is stumbling and Abe’s economic reforms will face resistance from the upper house. Growth and inflation have not met the government’s target and the yen has tumbled to around 120 under “Abenomics”, with the BoJ implementing radical monetary easing. Meanwhile, the Japanese Tankan indices were a mix in the Q3 readings. The Manufacturing Index dipped to 12 points, down from 13 points in Q2. There was better news from the Non-Manufacturing Index, improving to 16 points, up from 14 points in Q2. The yen showed little response to these key releases.

The US ended the week with mixed news, as inflation dipped while consumer confidence jumped. The Producer Price Index, the primary gauge of manufacturing inflation, dropped by 0.2%, its worst showing in six months. The estimate stood at -0.1%.  Meanwhile, UoM Consumer Sentiment moved higher for a fourth straight month, pointing to increased optimism among US consumers. The key indicator soared to 93.8 points, its highest level since January 2007 and well above the forecast of 89.6 points. On Friday, there was good news from retail sales and jobless claims. Core Retail Sales came in at 0.5%, ahead of the estimate of 0.1%. Not to be undone, Retail Sales posted a gain of 0.7%, beating the estimate of 0.4%. This was the indicator’s strongest showing in 12 months. There was more good news on the job front, as Unemployment Claims dipped to 294 thousand, below the forecast of 299 thousand.

USD/JPY for Monday, December 15, 2014

USD/JPY December 15 at 14:45 GMT

USD/JPY 118.77 H: 119.04 L: 117.96

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
116.66 117.94 118.69 119.63 120.63 121.39

 

  • USD/JPY posted strong gains early in the Asian session, testing resistance at 118.69. The pair then retracted. In the European session, the pair has pushed higher and broken above the 118.69 line. USD/JPY is steady early in the North American session.
  • 118.69 has switched to support role as the dollar has pushed higher. It could see further activity in the North American session. 117.94 is stronger.
  • On the upside, 119.63 is an immediate resistance line.
  • Current range: 118.69 to 119.63

Further levels in both directions:

  • Below: 118.69, 117.94, 116.66, 114.57 and 113.16
  • Above: 119.63, 120.63, 121.39 and 122.18

 

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Monday. This is consistent with the pair’s movement, as the yen has posted losses. The ratio has a majority of long positions, indicative of trader bias towards USD/JPY continuing to gain ground.

USD/JPY Fundamentals

  • 13:30 US Empire State Manufacturing Index. Estimate 12.1 points. Actual -3.6 points.
  • 14:15 US Capacity Utilization Rate. Estimate 79.4%.
  • 14:15 US Industrial Production. Estimate 0.8%.
  • 15:00 US NAHB Housing Market Index. Estimate 59 points.
  • 21:00 US TIC Long-Term Purchases. Estimate 72.8B.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.