USD/JPY – Yen Sinks After Strong US Unemployment Claims

The US dollar gained over 100 points against the yen on Thursday, following a strong Unemployment Claims release out of the US. On Friday, USD/JPY has steadied, as the pair trades in the low-101 range. The dollar managed to shrug off some other US indicators which were less than impressive, as PPI posted another decline and the Philly Fed Manufacturing Index plummeted to a six-month low. In the US, there’s a pause in the action after two busy days. Today’s highlight is JOLTS Job Openings. In Japan, the sole event of the day is the Bank of Japan monthly report.

There was positive news on the US employment front, as Unemployment Claims dropped to 323 thousand, a seven-week low. This was well below the estimate of 333 thousand. The strong figure will likely increase speculation as to when the Fed will step in and taper QE, although such a dramatic move is not considered likely before early 2014. The markets will be keeping a close eye on JOLTS Job Openings, which will be released later on Friday.

Low inflation indicators have been a major concern in Japan and the Eurozone, and the US economy is not immune from this problem. The Producer Price Index continues to look weak, posting a decline of 0.2% in October. This was the index’s second straight decline. Earlier this week, Core CPI showed a weak gain of 0.1%, and CPI dipped to -0.1%. These weak numbers point to slow economic activity and slow economic growth in the US.

The US dollar gained ground against the major currencies, including the yen, following the release on Wednesday 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 post gains. 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 on Thursday 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 lows.

USD/JPY for Friday, November 22, 2013

USD/JPY November 22 at 10:25 GMT

USD/JPY 101.23 H: 101.35 L: 100.96

USD/JPY Technical

• USD/JPY has edged lower in Friday trading. The pair dipped below the 101 line during the European session but has rebounded and moved higher.
• There is resistance at 102.53. This is followed by resistance at 103.30, which has remained intact since late May.
• 101.19 has reverted to a support role. It is followed by support at the key line of 100.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 98.92, 98.15, 97.18 and 96.00
• Above: 102.53, 103.30, 104.17 and 105.70

OANDA’s Open Positions Ratio

USD/JPY ratio continues to point to gains in short positions on Friday. This movement is reflected in the current movement of the pair, as the yen has posted slight gains. We have seen this trend towards short positions for most of the past week, which has led to an almost even split between long and short positions. This reflects a lack of trader bias as to which direction the pair might take.

After strong gains by the dollar on Thursday, USD/JPY has settled down in Friday trading. With no major US releases on the schedule, it could be an uneventful North American session.

USD/JPY Fundamentals

• 5:00 Bank of Japan Monthly Report.
• 13:40 US FOMC Member Esther George Speaks.
• 15:00 US JOLTS Job Openings. Estimate 3.89M.
• 17:15 US FOMC Member Daniel Tarullo Speaks.

*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.