USD/ JPY – Pushes Above 96 Level After Strong US Employment Numbers

The Japanese yen continues to lose ground, as USD/JPY crossed above the 96 line in the Friday session. The yen was pummeled by the dollar last week, as the Japanese currency lost close to 300 points last week. The yen took a tumble on Friday, as US employment data looked very sharp, boosting the US dollar. In Monday’s Japanese releases, Core Machinery Orders plunged 13.1%. This was the indicator’s worst showing since July 2012. M2 Money Stock gained 2.9%, beating the estimate of 2.7%. Preliminary Machine Tool Orders also looked weak. There are no US releases on Monday.

The Bank of Japan maintained interest rates and QE levels at a policy meeting last week. The benchmark rate remained at 0%-0.10%, while the size of the central bank’s asset purchase remained unchanged at JPY76 trillion. This policy meeting was the final one presided by governor Masaaki Shirakawa, who will be replaced by incoming governor Haruhiko Kuroda. The new governor is a proponent of strong monetary measures to kick-start the economy, and has suggested that the central bank consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the dollar in the past 3 months, much to the dismay and unease of Japan’s trading partners.

US employment numbers looked excellent last week, raising hopes that the US recovery is gaining traction. Unemployment Claims dropped to 340K, well below the estimate of 354K. Non-Farm Employment Claims hit 236 thousand, easily exceeding the forecast of 162 thousand. The Unemployment rate fell, dropping to 7.7% from 7.9%. The strong figures helped the dollar post sharp gains against the euro at the end of the week, and we could see the greenback make further gains if US number numbers continue to look sharp. The strong data has raised speculation that the Fed might wind up its current round of QE, which involves the purchase of $85 billion in assets each month. Previously, the Fed has said that the open-ended asset purchases would continue until unemployment fell to 6.5%. However, if the economy continues to show signs of improvement, the Fed will face pressure to wind up or at least modify the current asset purchase program.

USD/JPY for Monday, March 11, 2013

USD/JPY 96.14 H: 96.24 L: 95.96

USD/JPY Technical 

USD/JPY has leveled off as we begin the new trading week. The line of 96.02 is providing weak support. The pair is receiving stronger support at 95.27. On the upside, the pair faces resistance at 97.24. This line has remained intact since August 2009.

• Current range: 96.02 to 97.24

Further levels in both directions:

• Below: 96.02, 95.27, 94.59, 93.14 and 92.53
• Above: 97.24, 98.45, 99.38 and 99.98

OANDA’s Open Position Ratios

USD/JPY ratio is pointing to strong movement towards long positions in Monday trading. The pair did push higher on Friday, but has since leveled off, as the pair trades just above the 96 level. Trader sentiment remains close to an even split, indicating that trader sentiment remains divided as to where the pair will go from here.

The yen had a rough week, and USD/JPY is now above the 96 level, as the pair continues to hit multi-year highs. Will the upward momentum continue? With no US releases scheduled on Monday, we could see the pair trade quietly.

USD/JPY Fundamentals

• 6:03 Japanese Preliminary Machine Tool Orders. Actual -21.5%
• 23:50 Japanese BSI Manufacturing Index. Estimate -6.2 points.
• 23:50 Bank of Japan Monetary Policy Meeting Minutes
• 23:50 Japanese Tertiary Industry Activity. Estimate -0.1%
• 23:50 Corporate Goods Price Index. Estimate -0.1%

*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.