USD/JPY – Shrinking Yen Expected to Weaken Further in 2015

USD/JPY has steadied on Wednesday, after the yen gained about 100 points a day earlier. Later in the European session, USD/JPY is trading in the mid-119 range. On the release front, Japanese markets are closed on Wednesday and Thursday and there are no Japanese releases until next week. In the US, Unemployment Claims was weaker than expected, jumping to 298 thousand last week.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 points a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

The yen started 2014 at the 105 line, but has taken a tumble, as USD/JPY is trading just under the key 120 level as we wrap up the year. This is a sharp decline of 12.5% and marks the fourth annual loss for the hapless Japanese currency. Last week, Prime Minister Shinzo Abe announced a stimulus program to kick-start the sluggish economy and we could see more stimulus if the economic conditions don’t improve. With the Federal Reserve likely to raise interest rates sometime in 2015, the divergence in monetary stance between the Fed and the BOJ will likely push the yen to lower levels in 2015.

USD/JPY for Wednesday, December 31, 2014

USD/JPY December 31 at 13:30 GMT

USD/JPY 119.58 H: 119.78 L: 119.25

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
116.69 117.94 118.69 119.83 120.63 121.39

 

  • USD/JPY has shown limited movement during the day. The pair touched a high of 119.78 late in the Asian session, putting pressure on resistance at 119.83.
  • 119.83 is a weak resistance line. 120.63 is next.
  • 118.69 continues to provide strong support.
  • Current range: 118.69 to 119.83

Further levels in both directions:

  • Below: 118.69, 117.94 and 116.69 and 115.56
  • Above: 119.83, 120.63, 121.39, 122.18 and 124.16

 

OANDA’s Open Positions Ratio

USD/JPY is almost unchanged on Wednesday. This is consistent with the lack of movement shown by USD/JPY. The ratio has a majority of long positions, indicative of trader bias towards the dollar breaking out of range and posting gains.

USD/JPY Fundamentals

  • 13:30 US Unemployment Claims. Estimate 287K. Actual 298K.
  • 14:45 US Chicago PMI. Estimate 60.2 points.
  • 15:00 US Pending Home Sales. Estimate 0.6%.
  • 15:30 US Crude Oil Inventories. Estimate 0.2M.
  • 17:00 US Natural Gas Storage. Estimate -37B.

*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.