USD/JPY – Rangebound to Start New Year

USD/JPY is almost unchanged as we start the new year. In Thursday’s European session, the pair is trading in the mid-105 range. In economic news, there are two key releases out of the US on today’s schedule – Unemployment Claims and ISM Manufacturing PMI. There are no Japanese releases on Thursday, as Japanese markets are closed for a holiday.

All eyes will be on Unemployment Claims, which will be released on Thursday. Last week’s release pointed to a sharp drop, as the key employment indicator bounced back nicely following two disappointing releases. With the Federal Reserve poised to begin its long-awaited QE taper next month, employment releases have taken on added significance. If the US labor market continues to improve, the Fed could decide on another taper early in 2014, which would give a boost to the US dollar against its major rivals.

Japan’s economy is heading in the right direction, but the Japanese consumer has not jumped on to the bandwagon just yet. Household Spending dropped to a paltry 0.2% in November. The markets had expected a much better release, with the estimate standing at 1.9%. Preliminary Industrial Production also fell, dropping to o.1%, well off the estimate of 0.6%. There was good news as well, as Retail Sales jumped 4.0%, its sharpest gain since August 2010. The estimate stood at 2.9%. Inflation continues to rise, as Tokyo Core CPI posted a respectable gain of 0.7%, matching the forecast.

The Bank of Japan released the minutes of its most recent policy meeting last week and there was a consensus that the economic recovery is continuing. However, two board members expressed concern about the pace of growth, as GDP in Q3 showed a gain of just 0.3%, well off the Q2 reading of 0.9%. Even if GDP expands in Q4, there is concern that a sales tax hike in April could slow growth in 2014. The minutes also indicated that one policy member expressed doubt that the BOJ would reach its inflation target of 2% by 2015. However, BOJ Governor Haruhiko Kuroda insists that the country is on track to meet this goal and he reiterated this on Thursday in a meeting with Prime Minister Shinzo Abe. The BOJ’s aggressive monetary policy has revived the economy and put the breaks on deflation, but has severely weakened the yen, which has lost 17% of its value against the greenback in 2013.

USD/JPY for Thursday, January 2, 2014

USD/JPY January 2 at 10:40 GMT

USD/JPY 105.34 H: 105.40 L: 105.24

USD/JPY Technical

• USD/JPY is rangebound in Thursday trading, as the pair remains above the 105 level.
• 104.17 continues to provide support. This line has some breathing room as the pair trades above the 105 line. This is followed by support at 103.30.
• On the upside, there is resistance at 105.70. This line could face some pressure if the dollar can break out and post some gains. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
• Current range: 104.17 to 105.70

Further levels in both directions:

• Below: 104.17, 103.30, 102.53, 101.19 and 100.00
• Above: 105.70, 106.85, 107.73 and 108.77

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in Thursday trading. This is consistent with what we are seeing from the pair, which is showing almost no movement. The ratio remains almost evenly split between short and long positions, reflecting a lack of bias in trader sentiment as to which direction the yen will take next.

USD/JPY is steady and continues to trade at high levels. We could some stronger movement in today’s North American session as the US releases key employment and manufacturing data later in the day.

USD/JPY Fundamentals

• 13:30 US Unemployment Claims. Estimate 334K.
• 14:00 US Final Manufacturing PMI. Estimate 54.4 points.
• 15:00 US ISM Manufacturing PMI. Estimate 56.8 points.
• 15:00 US Construction Spending. Estimate 0.7%.
• 15:00 US ISM Manufacturing Prices. Estimate 53.0 points.

*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.