USD/JPY – Yen Edges Higher As Japanese Inflation Data Disappoints

The Japanese yen edged higher in Friday trading, following the release of weak Japanese inflation numbers. In Friday trading, the dollar is putting pressure on the yen, as USD/JPY continues to test the 93 line. Both the Tokyo and National CPIs posted declines, and Household Spending dropped sharply. In the US, Thursday’s key releases were a mix. GDP climbed a disappointing 0.1%, while Unemployment Claims easily beat the forecast. There are a host of key releases on Friday, highlighted by ISM Manufacturing PMI. There are no Japanese releases on Friday.

Japanese releases continue to point to a weak economy, despite the agressive efforts of the Japanese government and the Bank of Japan. Both have declared war on inflation, but we are yet to see tangible results from these efforts, as underscored by Thursday’s numbers. Tokyo CPI declined by 0.6%, while National Core CPI fell 0.2%. Although the markets had anticipated these numbers, the readings point to a deflationary trend in the Japanese economy.  Business spending, a key component to engine growth, has also failed to improve, even with a much more competitive yen. Capital Spending plunged 8.7%, its first decline in over a year. The markets had predicted a 7.0% drop. The government’s aggressive monetary policy has ravaged the yen, but has not revived the anemic Japanese economy. Will the shuffle in top management at the BOJ change matters? Time will tell if a new governor at the helm of the central bank will result in more positive releases than those that we continue to see. 

With the markets glued to developments in Italy this week, US economic data was pushed to the sidelines. However, the economic news out of the US was generally positive. CB Consumer Confidence and New Home Sales both looked very sharp. There was also good news from the US manufacturing industry, as the Richmond Manufacturing Index hit 6 points, easily beating the forecast of -4. Core Durable Goods Orders jumped 1.9%, while Pending Home Sales gained a strong 4.5%. Both key releases were well above expectations. The fly in the ointment was GDP, which posted a negligible gain of 0.1%, missing the estimate. The poor reading raises concerns about the health of the US economy. Unemployment Claims dropped nicely, easily beating the forecast. All in all, US releases were positive, and the markets will be hoping that the good news continues into March.

USD/JPY for Friday, Mar 1, 2013

USD/JPY Mar 1 at 13:15 GMT

USD/JPY 92.73  H: 93.03  L: 92.44

USD/JPY Technical

The yen remains under pressure, as USD/JPY touched above the 93 line earlier in Friday trading. The pair faces weak resistance at 93.14, and this line could be tested if the US dollar can muster some upward momentum. The next line of resistance is at 94.59. On the downside, 92.53 is providing support. This is a weak line, which has seen a fair amount of activity in the past couple of days. The next support level is just below the round number of 92, at 91.94.

• Current range: 92.53 to 93.14.

Further levels in both directions:

• Below: 92.53, 91.94, 91.30, 90.91 and 90.18
• Above: 93.14, 94.59, 95.27 and 96.02

OANDA’s Open Position Ratios

The USD/JPY ratio has resumed movement after a quiet Thursday, with direction in the movement of long positions. In the European trading session, we are not seeing much upward movement by the pair, although the pair did briefly push across the 93 line. If the current activity in the ratio continues, it could signal expectations for the US dollar to post gains against the yen.

The yen enjoyed a strong start to the week, but the dollar has clawed back, posting modest gains over the last few days. Where is the pair headed? Disappointing Japanese data will do little to bolster confidence in the yen, and with new appointments at the Bank of Japan pointing to a more agressive central bank, look for the yen to continue to face strong pressure from the US dollar. 

USD/JPY Fundamentals

• 13:30 US Core PCE Price Index. Estimate 0.1%.
• 13:30 US Personal Spending. Estimate 0.2%.
• 13:30 US Personal Income. Estimate -2.3%.
• 14:00 US Final Manufacturing PMI. Estimate 55.2 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 76.3 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US ISM Manufacturing PMI. Estimate 52.7 points.
• 15:00 US Construction Spending. Estimate 0.6%.
• 15:00 US ISM Manufacturing Prices. Estimate 57.3 points.
• All Day: US Total Vehicle Sales. Estimate 15.1M.
• Saturday, 3:00 US Federal Reserve Chairman Bernard Bernanke Speaks.

*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.