USD/JPY – Yen Steady As Syrian Crisis Subsides

USD/JPY is trading quietly, as markets jitters over a military strike by the US against Syria have eased. After two days of strong gains, USD/JPY has steadied, as the pair trades in the low-98 range in Friday’s European session. On Thursday, Japanese Household Spending missed the estimate, but inflation indicators met market expectations. In the US, Preliminary GDP posted a strong gain and Unemployment Claims was very close to the forecast. On Friday, Japanese Housing Starts posted another strong gain but fell short of the estimate. In the US, there are no major releases, but we’ll get a look at PMI and consumer confidence numbers later in the day.

The markets reacted nervously this week as a US military strike against Syria appeared imminent. The US had declared that it would respond to a chemical attack, apparently by the Syrian government, which killed hundreds of civilians. The yen dropped sharply, losing about 150 points over the past two days. However, there is now a strong possibility that a strike by the US could be postponed until mid-September. On Thursday, the British parliament voted by a narrow margin not to join any US attack on Syria, and other US allies do not want to take any action before the UN has a chance to review data collected by UN inspectors in Syria. This complicates President Obama’s attempts to solidify a coalition before taking military action.

US releases have been pointing in all directions this week. On Wednesday, US Pending Home Sales was a disappointment, but Thursday’s key releases looked solid. Preliminary GDP posted another strong gain of 2.5% in Q1, after a 2.4% rise in Q1. Unemployment Claims dropped slightly to 331 thousand, just shy of the estimate of 330 thousand. These strong numbers, especially the positive Unemployment Claims release, will likely fuel speculation in the markets that the Federal Reserve could taper QE in September rather than later in the year, so we could see the dollar post gains against the euro.

Over in Japan, Household Spending, an important consumer spending indicator, posted its first gain in three months. However, the weak rise of just 0.1% fell short of the estimate of 0.4%. Inflation numbers looked better, as both Tokyo Core CPI and National Core CPI  continue to post gains and met expectations. The government has made the elimination of deflation, which has hobbled the economy for years, a top economic priority. This seems to be working as we are finally seeing some inflation in the Japanese economy. On Friday, Japanese Housing Starts dropped from 15.3% to 12.0%, well off the estimate of 14.5%.

USD/JPY for Friday, August 30, 2013

USD/JPY August 30 at 10:50 GMT

USD/JPY 98.19 H: 98.47 L: 97.88

USD/JPY Technical

• USD/JPY has steadied after sharp gains earlier in the week. The pair dropped to a low of 97.88 early in the European session but has crossed back above the 98 line.
• The pair is facing resistance at 98.43. This is a weak line and could break if the yen resumes its downward movement. There is stronger resistance at 99.45.
• On the downside, USD/JPY continues to receive support at 97.83. This is followed by stronger support at 97.18.
• Current range: 97.83 to 98.43

Further levels in both directions:

• Below: 97.83, 97.18, 96.20, 95.60 and 94.29
• Above: 98.43, 99.45, 100.00, 100.85 and 101.66

OANDA’s Open Positions Ratio

USD/JPY ratio continues to point to movement towards short positions, which have increased significantly since mid-week. This is not reflected in the current movement of USD/JPY, as the pair is showing little movement in Friday trading. The ratio continues to have a strong majority of long positions, indicative of strong trader bias towards the dollar continuing to push to higher ground.

USD/JPY has steadied, as the crisis over Syria has subsided, at least for now. With no key releases out of the US on Friday, we could see the pair continue to trade quietly in the North American session.

USD/JPY Fundamentals

• 5:00 Japanese Housing Starts. Estimate 14.5%. Actual 12.0%.
• 12:30 US Core PCE Price Index. Exp. 0.2%.
• 12:30 US Personal Spending. Exp. 0.3%.
• 12:30 US Personal Income. Exp. 0.3%.
• 13:00 US FOMC Member James Bullard Speaks.
• 13:45 US Chicago PMI. Exp. 53.2 points.
• 13:55 US Revised UoM Consumer Sentiment. Exp. 81.2 points.
• 13:55 US Revised UoM Inflation Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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