USD/JPY – Improving Dollar Hits 109

USD/JPY has moved upwards on Thursday, as the US dollar has posted broad gains following the FOMC policy statement on Wednesday. In the European session, the pair is trading just above the 109 line. On the release front, there are two major US events -GDP and Unemployment Claims. Both indicators are expected to post strong figures, so we could see the dollar post gains in the North American session. As well, Federal Reserve Chair Janet Yellen will address an event in Washington. In Japan, today’s highlights are Tokyo CPI and Household Spending.

Japanese data continues to impress this week. Preliminary Industrial Production sparkled in September, with a gain of 2.7%, compared to a reading of -1.5% a month earlier. The estimate stood at 2.3%. Earlier in the week, Japanese Retail Sales was unexpectedly strong in September, climbing 2.3%, its strongest gain since March and well above the estimate of 0.9%. There has been concern about consumer spending in Japan after the sales tax was raised in April from 5% to 8%. The government plans to increase the tax to 10%, but is wary about hurting the economy, which has been marked by modest growth. The Household Spending report later on Thursday will be an important gauge of consumer spending, a key engine of economic growth.

The US dollar posted strong gains on Wednesday, boosted by a hawkish Federal Reserve policy statement. The Fed said that the labor market is strengthening and inflation remains on target, although it did note that the labor market participation rate remains low. As expected the Fed completed the taper of its QE3 program. The asset-purchase program was initially started in 2008, at the height of the economic crisis, in order to boost a weak US economy. The termination of the QE is a symbolic step which is a vote of confidence from the powerful Fed that the US economy is on the right track. 

US durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was a second straight decline, and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. This easily beat the estimate of 87.4 and marked a 7-year high. An increase in consumer confidence usually translates into stronger consumer spending, which is a critical component for economic growth.

USD/JPY for Thursday, October 30, 2014

USD/JPY October 30 at 11:25 GMT

USD/JPY 109.10 H: 109.31 L: 108.84

USD/JPY Technical

• USD/JPY posted gains in the Asian session. The pair is choppy in the European session.
• 109.82 is the next resistance line.
• 108.58 has reverted to a support line after the yen lost ground on Wednesday. 107.68 is next.
• Current range: 108.58 to 109.82

Further levels in both directions:

• Below: 108.58, 107.68, 106.85, 105.44 and 104.
• Above: 109.82, 110.68, 112.24 and 113.68

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Thursday, continuing the direction seen a day earlier. This is not consistent with the pair’s movement, as the dollar continues to post gains. The ratio has a majority of long positions, indicative of trader bias towards the dollar moving higher.

USD/JPY Fundamentals

• 12:30 US Advance GDP. Estimate 3.1%.
• 12:30 US Unemployment Claims. Estimate 284K.
• 14:30 US Advance GDP Price Index. Estimate 2.0%.
• 13:00 US Federal Reserve Chair Janet Yellen Speaks.
• 14:30 US Natural Gas Storage. Estimate 83B.
• 23:30 Japanese Household Spending. Estimate -4.0%.
• 23:30 Japanese Tokyo Core CPI. Estimate 2.5%.
• 23:30 Japanese National Core CPI. Estimate 3.0%.
• 23:30 Japanese Unemployment Rate. Estimate 3.6%.

*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.