USD/JPY – Dollar Rises on Superb US GDP

USD/JPY has posted gains on Tuesday, as USD/JPY is trading in the mid-120 range late in the North  American session. On the release front, there are no Japanese releases, as the markets  are closed for a holiday. It’s a busy schedule in the US, ahead of the Christmas holiday. Final GDP soared in the third quarter, with a gain of 5.0%, but Core Durable Goods Orders dropped by 0.4%. Later in the day the US releases more key data, with the publication of New Home Sales and UoM Consumer Sentiment.

US GDP was red-hot in Q3, jumping 5.0%, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and confidence. The news was not as positive from Core Durable Goods Orders, which posted a decline of 0.4%, its fourth decline in five readings. The reading was well off the estimate of 1.1%. Durable Goods Orders looked even worse, with a reading of -0.7%. This surprised the markets which had anticipated a strong gain of 3.0%.

The US dollar made strong gains against its major rivals last week following the Federal Reserve policy statement. Previous Fed policy statements have usually stated that the Fed would maintain low rates for a “considerable time”, but the December statement changed terminology, saying the Fed would be “patient” before raising rates. In a follow-press conference, Federal Reserve chair Janet Yellen was less ambiguous, saying that the Fed was unlikely to raise rates for the “next couple of meetings”. The markets took this to mean that a rate hike is in the works, but not before April. The yen was down sharply on the news as USD/JPY gained about 130 points on Wednesday.

Prime Minister Shinzo Abe won a convincing electoral victory last week, but he will have little time to savor the win as he grapples with a struggling economy. Growth and inflation remain well below the government’s target and the BoJ’s radical monetary easing scheme has ravaged the yen, which remains close to the 120 level. With the BOJ maintaining its monetary policy while the Fed will likely raise rates, we could see the shaky yen hit further lows against the US dollar.

USD/JPY for Tuesday, December 23, 2014

USD/JPY December 23 at 14:35 GMT

USD/JPY 120.71 H: 120.74 L: 120.05

USD/JPY Technical

• USD/JPY was flat in the Asian and European sessions. The pair has moved higher in North American trade, breaking above resistance at 120.63.
• 120.63 has reverted to a support role and is a weak line. 119.83 is stronger.
• 121.39 is an immediate resistance line. 122.18 is next.
• Current range: 120.63 to 121.39

Further levels in both directions:

• Below: 120.63, 119.83, 118.69, 117.94 and 116.69
• Above: 121.39, 122.18 and 124.16 and 125.72

OANDA’s Open Positions Ratio

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

USD/JPY Fundamentals

• 13:30 US Core Durable Goods Orders. Estimate 1.1%. Actual -0.4%.
• 13:30 US Final GDP. Estimate 4.3%. Actual 5.0%.
• 13:30 US Durable Goods Orders. Estimate 3.0%. Actual -0.7%.
• 13:30 US Final GDP Price Index. Estimate 1.4%. Actual 1.4%.
• 14:00 US HPI. Estimate 0.3%. Actual 0.6%.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 93.5 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US New Home Sales. Estimate 461K.
• 15:00 US Core PCE Price Index. Estimate 0.1%.
• 15:00 US Personal Spending. Estimate 0.5%.
• 15:00 US Personal Income. Estimate 0.6%.
• 15:00 US Richmond Manufacturing Index. Estimate 8 points.

*Key releases are highlighted in bold

*All release times are GMT

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