USD/JPY – Yen Jumps on Weak Chinese Manufacturing Data

The Japanese yen has made huge gains on Tuesday, as USD/JPY trades in the high-115 range on Tuesday. Late in the European session, the pair is trading under the 116 line, marking a 4-month low. On the release front, Japanese Manufacturing PMI was unchanged at 52.1 points. Later in the day, Japan will release Trade Balance. In the US, today’s major events are Building Permits and Housing Starts.

The yen has served as an unwilling punching bag for the US dollar for months, and last week USD/JPY pushed above the 121 line. However, the Japanese currency has turned the tables this week, as the yen has gained 200 points on Tuesday and some 320 since the start of the week. The safe-haven yen took advantage of a dip in the Chinese Flash Manufacturing PMI, which came in at 49.5 points. This pointed to contraction in the PMI for the first time since May and raises concerns about continuing weakness in the global economy.

Japan’s ruling Liberal Democratic Party registered a convincing election victory on the weekend, 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.

In the US, 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. Earlier in the week, 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 Tuesday, December 16, 2014

USD/JPY December 16 at 12:40 GMT

USD/JPY 116.23 H: 117.96 L: 115.58

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
112.94 113.16 114.57 116.66 117.94 118.69

 

  • USD/JPY lost ground in the Asian session. The pair posted sharp losses in the European session, breaking below support at 116.66.
  • 114.57 is providing strong support. This line has held firm since early November.
  • 116.66 has reverted to a resistance role as the yen continues to post gains. 117.94 is stronger.
  • Current range: 114.57 to 116.66

Further levels in both directions:

  • Below: 114.57, 113.16, 112.94 and 110.68
  • Above: 116.69, 117.94, 118.69 and 119.83

 

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Tuesday. This is not consistent with the pair’s movement, as the yen has posted strong gains. The ratio has a majority of long positions, indicative of trader bias towards the dollar recovering from its current slide and moving upwards.

USD/JPY Fundamentals

  • 1:35 Japanese Flash Manufacturing PMI. Estimate 52.3 points. Actual 52.1 points.
  • 13:30 US Building Permits. Estimate 1.06M.
  • 14:15 US Housing Starts. Estimate 1.04M.
  • 14:45 US Flash Manufacturing PMI. Estimate 56.1 points.
  • 23:50 Japanese Trade Balance. Estimate -0.99T.

*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.