USD/JPY – Steady as Japanese Data Mostly Positive

USD/JPY remains steady, as the pair was testing the 94 line in Friday’s session. Thursday’s Japanese data was mostly positive, and inflation indicators were slightly better than expectations. On Friday, Japanese Housing Starts easily exceeded the estimate. In the US, GDP and employment numbers were weak, as US releases were very disappointing this past week. Today’s highlight in the US is UoM Consumer Sentiment, and the markets will be hoping that a dismal week ends on a bright note.

On Thursday, there were a host of Japanese releases for the markets to chew on, and most of the news was positive. Manufacturing PMI climbed from 48.5 points to 50.4. This marked the first time since last May that the index was over the 50-point level, which indicates expansion. Household Spending came in at 0.8%, well above the estimate of 0.4%. Tokyo Core CPI declined by 0.5%, but this beat the estimate of -0.6%. The story was similar with National Core CPI, which dropped -0.3%. The estimate stood at -0.4%. On the downside, the Unemployment Rate nudged up to 4.3% from 4.2%, and Preliminary Industrial Production declined by 0.1%, way off the forecast of 2.6%. Housing Starts wrapped up the trading week on a positive note, posting a 3.0% gain. This blew past the estimate of a 1.0% decline.

There has been a lot of talk of the US recovery gaining traction, but this week has been a bust, as economic releases pointed to weakness in a wide range of sectors in the US economy. There were two major housing releases this week, and hopes of strong numbers were dashed. New Home Sales fell sharply from 437 thousand to 411 thousand, well below expectations. Pending Home Sales also looked weak, declining 0.4%. The forecast stood at -0.3%. Unemployment Claims have looked sharp over the past four weeks, but slumped this time around, coming in at 357 thousand, well above the estimate of 340 thousand. Final GDP rose 0.4%, missing the forecast of 0.5%. Earlier in the week, manufacturing and consumer confidence also missed their estimates. Put simply, this has been a week has been one that the markets will be happy to forget.

The Cyprus bailout crisis, which has spooked markets across the globe, appears to have receded. There was calm as country’s banks reopened on Thursday, after being closed for the past two weeks. Fearing a bank run, the government has imposed strict capital controls, including limiting withdrawals to 300 euros a day, and a ban on cashing checks. Under the EUR10 billion bailout agreement, all bank deposits under 100,000 euros will continue to be insured. As well, under the agreement, Deposits above this amount will be taxed, but details have not been released. Laiki, one of the country’s biggest banks, will be shut down. The original bailout agreement provided for a tax on all Cypriot bank deposits, and this had fueled fears that bank deposits could be taxed or seized in any EU country. Although this tax grab was quickly shelved after a huge outcry in Cyprus, the damage to investor confidence will certainly take time to repair.

USD/JPY for Friday, March 29, 2013

USD/JPY 94.06  H: 94.28 L: 93.95

USD/JPY Technical

In the Friday session, USD/JPY has edged lower, and is testing the 94 level. The pair is facing resistance at 94.59. This is followed by a resistance line at 95.27. On the downside, 93.14 is providing support. The next support level can be found at 92.53, which has remained intact since the beginning of March.

• Current range: 93.14 to 94.59

Further levels in both directions:

• Below: 93.14, 92.53, 91.48, 90.69 and 90.13
• Above: 94.59, 95.27, 96.02 and 97.24

OANDA’s Open Position Ratios

USD/JPY ratio continues to show almost no movement. This activity is reflected in lack of activity by the pair, which has been hugging the 94 line. Traders should monitor the ratio for signs of movement, as this could be reflected in the currency pair. With the recent shift in favor of long positions, these now command a comfortable majority, indicative of a bias towards the pair moving upwards.

USD/JPY continues to trade slightly above the 94 level, and the yen has received some support from respectable Japanese releases as well as weak US numbers. We can expect the pair to be fairly quiet until the end of the trading week. Next week will likely see more activity, as the markets keep a close eye on the upcoming Bank of Japan policy meeting.

USD/JPY Fundamentals

• 5:00 Japanese Housing Starts. Estimate -1.0%. Actual 3.0%
• 12:30 US Core PCE Price Index. Estimate 0.1%
• 12:30 US Personal Spending. Estimate 0.6%
• 12:30 US Personal Income. Estimate 1.0%
• 13:55 US Revised UoM Consumer Sentiment. Estimate 73.2 points
• 13:55 US Revised UoM Inflation Expectations

*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.