USD/JPY – Yen Improves after Weak US Non-Farm Payrolls

The see-saw battle continues between the US dollar and the Japanese yen. Late last week, the dollar flexed some muscle and looked like it could push above the 100 level. The yen recovered however, after some disappointing US employment numbers on Friday. The yen has posted some gains on Monday, as USD/JPY trades in the mid-98 range in the European session. It’s a very quiet start to the week, with just two releases on the schedule. Today’s highlight is the US ISM Non-Manufacturing PMI, a key event. There are no Japanese releases on Monday.

Over in the US, the week ended with disappointing employment numbers. With excellent numbers from ADP Non-Farm Payrolls and US Unemployment Claims last week, there were high hopes that the all-important Non-Farm Payrolls would keep pace, but this did not occur. Non-Farm Payrolls dropped sharply from 195 thousand to 162 thousand, well of the estimate of 184 thousand. The US Unemployment Rate edged down to 7.4%, its lowest level in over three years. However, this is not as important as it may seem at first glance. The reason? The participation rate in the US employment market actually dropped and is hovering just over 63%. This is a weak figure, and points to trouble in the labor market, even with a lower unemployment rate.

The US Federal Reserve released a policy statement last week, but there was no dramatic news to shake up the markets. The Fed stated that it would continue with the present level of QE, namely $85 billion in asset purchases each month, and gave no indication about when it might taper QE. There is speculation that the Fed will press the QE trigger in September, so we could see some volatility from EUR/USD as the markets try to get a better handle on the Fed’s intentions. The Fed has said it won’t taper QE without stronger employment figures, so we can expect US employment releases to be under the market microscope.

USD/JPY for Monday, August 5, 2013

USD/JPY August 5 at 11:10 GMT

USD/JPY 98.48 H: 99.15 L: 98.28

USD/JPY Technical

USD/JPY is moving lower, as it trades in the mid-98 range. The pair touched a low of 98.28 early in the European session. USD/JPY is testing support at 98.43. This line could break if the yen continues its upward momentum. 97.83 is providing strong support.

On the upside, USD/JPY faces resistance at 99.45. This line has strengthened as the yen as improved and trades at lower levels. This is followed by resistance at the all- important 100 level.

• Current range: 98.43 to 99.45

Further levels in both directions:

• Below: 98.43, 97.83, 97.18, 96.20 and 95.60
• Above: 99.45, 100.00, 100.85, 101.66 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio continues the trend we saw throughout last week, and is unchanged in Monday trading. This is not reflected in what we are currently seeing from the pair, as the yen has posted modest gains against the dollar. Long positions continue to enjoy a sizeable majority of open positions, indicating that trader sentiment is biased in favor of the US dollar rebounding and moving upwards.

The US dollar got close to the 100 level late last week, but has been in retreat as the yen has recovered nicely. The US releases a key Services PMI event later today, so we could see some volatility from USD/JPY.

USD/JPY Fundamentals

• 14:00 US ISM Non-Manufacturing PMI. Estimate 53.2 points.

*Key releases are highlighted in bold

*All release times are GMT

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