USD/JPY – Little Movement as US Markets Take Holiday

USD/JPY has taken a breather on Thursday, after showing volatility over the past couple of days. The 100 level continues to see activity, as the pair trades in the high-99 range in the European session. US markets are closed today for the July 4th holiday. In Japan, BOJ Governor Haruhiko Kuroda addressed a banking conference in Tokyo, and Japanese 30-year bonds were almost unchanged.

The markets had plenty of US data to sift through on Wednesday, as the US released four key events. The always important employment numbers looked solid. ADP Non-Farm Payrolls, an unofficial release which precedes Friday’s government release, posted a gain of 188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims, released ahead of the July 4th holiday, came in at 343 thousand, slightly below the estimate of 345 thousand. The US continues to churn out larger trade deficits, as the July release came in at -$45.0 billion, much higher than the estimate of $-40.3 billion. Finally, the ISM Non-Manufacturing PMI looked weak, dropping from 53.7 points to 52.2 points. This was well short of the estimate of 54.3 points.

Japan’s aggressive monetary policy may be bearing some fruit, as Japanese economic indicators are showing improvement. Last week, Tokyo Core CPI, the most important Japanese inflation index, came in above zero, indicating inflation. Manufacturing, housing and retail sales numbers were also solid. On Sunday, the important Tankan indexes, which are released quarterly, were both positive. The Manufacturing Index jumped from -8 points to 4 points, and beat the estimate of 3 points. This was the best showing since Q1 of 2011. The Non-Manufacturing Index kept pace, climbing from 6 points to 12 points, which matched the estimate. If the positive news continues, we could see increased market confidence in the Japanese economy as well as a stronger yen.

There was another major headache for the Eurozone, this time courtesy of Portugal. The country finds itself gripped in a deep political crisis, which sent the euro lower and could have repercussions for the entire Eurozone. The country entered into a bailout agreement back in 2011, worth EUR 78 billion. For its part, Portugal agreed to implement tough austerity measures. However, the economy has not bounced back, as Portugal been stuck in a recession for three years and unemployment is a staggering 18%. Finance Minister Vitor Gaspar, who has been in charge of the austerity drive, shocked the markets by resigning on Monday, and the crisis has intensified with the resignation of a number of other ministers. European stock markets were down, and yields on Portuguese government bonds have jumped, increasing borrowing costs for the country. Prime Minister Pedro Passos Coelho, is putting on a brave face, insisting that the government will be able to carry on. The safe-haven yen moved higher on the news, and posted gains against the dollar.

USD/JPY for Thursday, July 4, 2013

USD/JPY 99.70 H: 100.00 L: 99.49

USD/JPY Technical

USD/JPY continues to trade below the 100 level. The pair is facing resistance at the 100 level. This is a weak line, and could continue to see action if the pair shows more volatility. The next resistance line is stronger, at 100.85. On the downside, the pair is receiving weak support at 99.57. This is followed by a strong support level at 98.43.

• Current range: 99.57 to 100.00

Further levels in both directions:

• Below: 99.57, 98.43, 97.83, 97.18, 96.03 and 94.91
• Above: 100.00, 100.85, 101.66 and 102.52

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Thursday session. This is reflected in the pair, which is showing little movement. Long positions continue to dominate the open positions, indicating a strong trader bias towards the dollar moving higher.

USD has settled down after some strong movement in both directions, and finds itself slightly below the 100 line. We could be in for a quiet day, as trading will be thin, with the US markets closed for a holiday.

USD/JPY Fundamentals

• 00:30 Bank of Japan Governor Haruhiko Kuroda Speaks.
• 3:45 Japanese 30-year Bond Auction. Actual 1.89%.

*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.