USD/JPY – Yen Continues to Pressure Greenback

The Japanese yen has resumed its upward movement as it trades in the mid-104 range in Monday’s European session. Japanese markets are back in action after last week’s extended holiday. Today’s lone release is Monetary Base, which is expected to increase in December. In the US, today’s highlight is ISM Non-Manufacturing PMI. The markets are anticipating a slight improvement in the December release. As well, the Senate holds a vote on the nomination of Janet Yellen for head of the Federal Reserve, which is expected to pass easily.

US Unemployment Claims was almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand. The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP could impact on the next Fed decision regarding QE, after 2013 ended with QE tapering. While it was a small move, lowering asset purchases from $85 billion to $75 billion each month, the Fed did make a significant change its monetary policy, and this could have a significant positive impact on the US dollar. If US employment releases continue to look solid, we can expect further tapers in the near future, which could shake up the currency markets in favor of the US dollar.

The Bank of Japan released the minutes of its most recent policy meeting in the last week of December, and there was a consensus that the economic recovery is continuing. However, two board members expressed concern about the pace of growth, as GDP in Q3 showed a gain of just 0.3%, well off the Q2 reading of 0.9%. Even if GDP expands in Q4, there is concern that a sales tax hike in April could slow growth in 2014. The minutes also indicated that one policy member expressed doubt that the BOJ would reach its inflation target of 2% by 2015. BOJ Governor Haruhiko Kuroda insists that the country is on track to meet this goal and he reiterated this recently in a meeting with Prime Minister Shinzo Abe. The BOJ’s aggressive monetary policy has revived the economy and put the breaks on deflation, but has severely weakened the yen, which lost 17% of its value against the greenback in 2013.

USD/JPY for Monday, January 6, 2014

USD/JPY January 6 at 13:00 GMT

USD/JPY 104.59 H: 104.95 L: 104.15

USD/JPY Technical

• USD/JPY has posted modest losses in Monday trading. The pair dropped to a low of 104.15 early in the Asian session but has since moved to higher ground.
• 104.17 continues to provide support, but this is not a strong line and could face pressure if the yen continues to move higher. This is followed by a strong support line at 103.30.
• On the upside, there is resistance at 105.70. This line has some breathing room as the pair trades at lower levels. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
• Current range: 104.17 to 105.70

Further levels in both directions:

• Below: 104.17, 103.30, 102.53, 101.19 and 100.00
• Above: 105.70, 106.85, 107.73 and 108.77

OANDA’s Open Positions Ratio

Long positions have a majority in the USD/JPY ratio, indicating trader bias towards the dollar reversing directions and moving higher.

The yen continues to improve and is putting pressure on the dollar. With the US releasing a key PMI later in the day, we could see some volatility from the pair in the North American session.

USD/JPY Fundamentals

• 14:00 US Final Services PMI. Exp. 56.0 points.
• 15:00 US ISM Non-Manufacturing PMI. Exp. 54.6 points.
• 15:00 US Factory Orders. Exp. 1.8%.
• 22:30 US Fed Chairman Nomination Vote.
• 23:50 Japanese Monetary Base. Estimate 55.2%.

*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.