USD/JPY – Yen Rally Continues As Markets Fret Over Ukraine

The Japanese yen continues to make inroads against the US dollar, as the pair trades in the mid-101 range in Friday trading. There is growing tension in the markets over the crisis in the Ukraine, with a referendum over Crimea scheduled for Sunday. On the release front, US Unemployment Claims looked sharp, while Retail Sales met expectations. In the US, today’s key events are PPI and Preliminary UoM Consumer Sentiment. Over in Japan, the BOJ released minutes of its last policy meeting, with policymakers saying the country’s economy is on track. The sole Japanese release on Friday, Revised Industrial Production, came within market expectations.

All eyes are pointed east of the Eurozone, as the crisis in the Ukraine quickly heads to a boiling point. Russia has effectively taken over Crimea and a referendum over whether the region’s residents wants to join Russia will be held Sunday. Europe and the US have already slapped some sanctions on Russia, and have vowed to take stronger steps if the referendum goes ahead. There are also fears that Russia could invade eastern Ukraine, which has a pro-Russian population. Secretary of State John Kerry is meeting on Friday with his Russian counterpart to try and de-escalate the crisis, which some European leaders have described as the worst since the end of the Cold War in the 1990s.

No news was good news as far as the yen was concerned, as the BOJ minutes contained no surprises. The central bank said that the economy and inflation is in line with the forecasts, and the April sales tax hike should not hurt economic growth. The Abe government is implementing the tax hike in a bid to tackle Japan’s massive national debt, and there are concerns that consumer spending could suffer, which could dampen the current recovery.

In the US, concerns about the job market eased after a solid Unemployment Claims release on Thursday. The key indicator dropped to 315 thousand, down from 323 thousand the previous week. This beat the estimate of 334 thousand and marked a three-month low. Core Retail Sales and Retail Sales both posted gains of 0.3%, which were within market expectations. These indicators are the primary gauges of consumer spending, and although the gains were modest, they mark an improvement over the January readings.

With Nonfarm Payrolls improving and Unemployment Claims dropping, the markets can breathe more comfortably as the Fed is likely to take its scissors and trim QE next week for a third time. New York Fed President William Dudley stated last week that the threshold to alter the Fed’s program to wind up QE was “pretty high”. In other words, short of a serious economic downturn in the US economy, we can expect the QE tapers to continue, with the Fed aiming to wind up the program before the end of 2014.

USD/JPY for Friday, March 14, 2014

USD/JPY March 14 at 11:45 GMT

USD/JPY 101.45 H: 101.85 L: 101.41

USD/JPY Technical

• 102.53 has switched to a resistance role as the yen continues to climb. This is followed by a resistance line at 103.30.
• 101.19 has weakened as a support line and could be tested during the day. The next support line is the key level of 100.00, which has held firm since last November.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.65
• Above: 102.53, 103.30, 104.17, 105.70, 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to strong gains in long positions on Friday, continuing the trend we have seen for most of the week. This is not consistent with the pair’s current movement, as the yen continues to strengthen. Long positions make up a majority of the open positions in the ratio, indicating trader bias towards the dollar reversing its current downward trend.

The Japanese yen continues to point upwards and is trading in the mid-101 range. The US dollar remains under pressure in the European session.

USD/JPY Fundamentals

•  4:30 Japanese Revised Industrial Production. Estimate 4.0%. Actual 3.8%.
• 12:30 US Producer Price Index. Estimate 0.2%.
• 12:30 US Core PPI. Estimate 0.1%.
• 13:55 US Preliminary UoM Consumer Sentiment. Estimate 81.9 points.
• 13:55 US Preliminary 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.