USD/JPY – Yen Slides After Hawkish Fed Minutes

The US dollar is flexing some muscle at the expense of the Japanese yen, courtesy of the Federal Reserve minutes, which have indicated that we could see QE tapering early next year. USD/JPY has jumped to four-month highs, as the pair trades in the high-100 range. The dollar is on a roll, gaining about 350 points against the yen since late October. In economic news, US retail sales numbers were positive, but housing data disappointed. It’s another busy day in the US, with three key releases on the schedule – PPI, Unemployment Claims and Philly Fed Manufacturing Index. In Japan, the BOJ released a monetary policy statement. The Bank continues to sound optimistic about the Japanese economy and is maintaining its massive stimulus program.

The US dollar gained ground following the release of the minutes of the Federal Reserve’s most recent policy meeting. Policymakers said the current QE level of $85 billion monthly purchases of bonds could taper “in coming months” if the economy continued to improve. A scaling down of QE is dollar-positive, so we could see the greenback continue to make gains against the major currencies. Earlier in the week, Fed chair Bernard Bernanke said that the employment market improvement was “meaningful” and that interest rates would likely remain low even after QE ends.

As expected, the BOJ stated in a policy statement that it was maintaining its aggressive monetary stimulus program, which aims at raising inflation to 2%. At a follow-up press conference, BOJ Governor Haruhiko Kuroda noted that the US and Eurozone economies are improving and said that the Japanese economy was moving in line with the Bank’s forecasts. Under the BOJ’s monetary policy, inflation has risen and economic indicators are up, but the yen has plunged and continues to trade at multi-month highs.

Earlier this week, Japanese Trade Balance was released. The deficit showed little change in the October reading, coming in at -1.07 trillion yen. However, this figure was well above the estimate of -0.88 trillion. The larger deficit is being blamed on the rising costs of imports, notably crude oil and natural gas. As well, the weak yen is pushing up import prices, and we are likely to continue to see large monthly deficits.

USD/JPY for Thursday, November 21, 2013

USD/JPY November 21 at 12:15 GMT

USD/JPY 100.84 H: 100.93 L: 100.17

USD/JPY Technical

• USD/JPY has posted gains in Thursday trading. There is resistance at 101.19. This line could face pressure if the dollar continues to push higher. This is followed by resistance at 102.53, which has remained intact since late-May.
• The key line of 100 has reverted to a support role. It is followed by support at 98.92.
• Current range: 98.92 to 100.00

Further levels in both directions:

• Below: 100.00, 98.92, 98.15, 97.18 and 96.00
• Above: 101.19, 102.53, 103.30 and 104.17

OANDA’s Open Positions Ratio

USD/JPY ratio continues to point to gains in short positions in Thursday trading. This is not reflected in the current movement of the pair, as the dollar continues to push higher against the retreating yen. Long positions retain a slight majority, indicative of a trader bias towards the US dollar posting gains against the yen.

The dollar continues to pressure the yen. We could see more activity from the pair during the North American session, with the release of key US data, highlighted by Unemployment Claims.

USD/JPY Fundamentals

• 3:15 Bank of Japan Monetary Policy Statement.
• 7:19 Bank of Japan Press Conference.
• 13:30 US PPI. Estimate -0.2%.
• 13:30 US Unemployment Claims. Estimate 333K.
• 13:30 US Retail Sales. Estimate 0.1%.
• 13:30 US Core CPI. Estimate 0.1%.
• 14:00 US Flash Manufacturing PMI. Estimate 52.6 points.
• 14:45 FOMC Member Jerome Powell Speaks.
• 15:00 US Philly Fed Manufacturing Index. Estimate 15.8M.
• 15:30 US Natural Gas Storage. Estimate -34B.
• 18:00 FOMC Member James Bullard Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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