USD/JPY – Yen Rally Continues

USD/JPY has picked up on Monday right where it left off in Friday trading, as the yen continues to climb higher. The Japanese currency has gained about 150 points since Friday, trading in the mid-103 range. It’s a very quiet start to the week, with the Japanese markets closed for a holiday. Late Monday, we’ll get a look at Japanese Current Account. In the US, today’s sole release is the Federal Budget.

US employment numbers started 2014 on a positive note, but Friday’s Non-Farm Payrolls was dismal, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand.  Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate, which fell to 62.8%, its lowest since 1978. This figure points to a worrying trend of a jobless US recovery.

Friday’s disappointing Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve’s path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next meeting.  

USD/JPY for Monday, January 13, 2014

USD/JPY January 13 at 11:45 GMT

USD/JPY 103.40 H: 104.03 L: 103.26

USD/JPY Technical

• USD/JPY continues to lose ground in Monday trading. The pair barreled below the 104 line in the Asian session but has steadied in European trading in the mid-103 range.
• 103.30 is the next line of support. This is a weak line and could fall if the yen continues to improve. This is followed by a strong support level at 102.53.
• 104.17 has switched to a resistance role as the pair trades at lower levels. This is followed by a resistance line at 105.70.
• Current range: 103.30 to 104.17

Further levels in both directions:

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

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Monday trading. This is not reflected in what we are seeing from the pair, as the yen continues to post gains. Long positions have a majority in the USD/JPY ratio, indicating trader bias towards the dollar reversing the current downward spin and moving higher.

The yen continues to improve against the retreating US dollar in Monday trading. After strong gains in the Asian session, European trading has been uneventful.

USD/JPY Fundamentals

• 23:50 Japanese Current Account. Estimate -0.02T.
• 23:50 Japanese Bank Lending.
• 19:00 US Federal Budget Balance. Exp. 44.3B.

*Key releases are highlighted in bold

*All release times are GMT

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