USD/JPY – US Employment Numbers Keep Yen in Check

The US dollar remains high against the yen. USD/JPY is trading in the low-101 range in Monday’s European session. The dollar continues to enjoy broad strength after solid Non-Farm Payrolls release on Friday. The markets kicked off the new trading week with several Japanese releases. Current Account matched the forecast, Bank Lending edged higher, but the Economy Watchers Sentiment came in well below expectations. In the US, there is only one release on Monday, Consumer Credit.

The US dollar got a boost on Friday, thanks to a solid Non-Farm Payrolls release. The key indicator hit a four-month high, posting 200 thousand new jobs. This was well above the estimate of 163 thousand. Earlier in the week, Unemployment Claims came in just below the estimate. The unemployment rate was unchanged at 7.6%. There are two factors which have contributed to the dollar’s broad strength. First, last week’s strong employment data points to an improving US economy. Second, there is increased likelihood that the Federal Reserve could taper QE, which would be a dollar-positive event. The yen has paid the price for the dollar’s strength, as it trades above the 101 level.

Yes, the yen continues to drop, but there are signs that Japan’s aggressive monetary policy is pulling the economy out of the doldrums, as we see Japanese economic indicators point upwards and signs of inflation in the economy. Manufacturing, housing and retail sales numbers are looking better and the important Tankan indexes, which are released quarterly, were both positive. If the good news continues, we could see increased market confidence in the Japanese economy as well as a stronger yen.

Eurozone financial ministers are meeting in Brussels on Monday, and will be discussing whether to transfer the next installment of aid to Greece. Eurozone officials have expressed dissatisfaction with the lack of progress by the Greek government in implementing the bailout conditions, including budget cut shortfalls and cuts to the bloated public service. The next tranche of bailout funds amounts to EUR 8.1 billion, but these funds will not be delivered before the troika gives the go-ahead. The Eurogroup could decide to transfer smaller installments rather than the entire 8.1 billion, with each portion conditional on Greece meeting specific milestones in return for more aid. If the troika holds up aid to Greece, we can expect a sharp negative reaction from the markets.

USD/JPY for Monday, July 8, 2013

USD/JPY 101.22 H: 101.49 L: 100.93

USD/JPY Technical

USD/JPY continues to struggle as we start the new trading week. The pair is trading above the 101 line, and is facing resistance at 101.66. This line could face pressure if the yen continues to falter. The next resistance line is  at 102.52. This line was last tested in late May. On the downside, the pair is receiving support at 100.85. This is followed by the all-important 100 line.

 Current range: 100.85 to 101.66

Further levels in both directions:

• Below: 100.85, 100.00, 99.57, 98.43, 97.83 and 97.18
• Above: 101.66, 102.52, 1.03.30 and 105.16

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to movement towards short positions in the Monday session. This is reflected in what we are seeing from the pair, as the yen has posted modest losses against the dollar. Long positions continue to dominate the open positions, indicating a strong trader bias towards the dollar continuing to move to higher levels.

USD/JPY has pushed back above the 100 barrier, as the pair trades in the low-101 range. Will the yen continue to drop? With only a minor release out of the US today, it could be an uneventful start to the week for the pair.

USD/JPY Fundamentals

• 5:00 Japanese Economy Watchers Sentiment. Estimate 55.6 points. Actual 53.0 points.
• 19:00 US Consumer Credit. Estimate 13.2B.

*Key releases are highlighted in bold

*All release times are GMT

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