USD/JPY – Yen Moves Higher Ahead of Unemployment Claims

The Japanese yen has posted gains on Thursday, as USD/JPY has dropped below the 102 line. In economic news, Japanese inflation indicators continue to improve, as the Corporate Goods Price Index posted another strong gain. It will be a busy day over in the US, with three key releases on the schedule – Core Retail Sales, Retail Sales and Unemployment Claims. There are no Japanese releases on Thursday.

The BOJ has held the course on its aggressive monetary stance, reiterating that its number one priority is to push inflation up to the 2% level. After years of deflation which hobbled the economy, that will clearly take more time. However, inflation is on the rise, and the Corporate Goods Price Index posted a healthy gain of 2.4%, matching the forecast. Meanwhile, Japanese manufacturing numbers looked weak on Wednesday. Core Machinery Orders declined by 15.7%, its sharpest drop in five years. This was much worse than the market estimate of -4.1%. Tertiary Industry Activity also disappointed, declining by 0.4%, its third drop in four releases. The estimate stood at -0.2%. These weak numbers will raise concern about the health of the Japanese manufacturing industry. There was a silver lining from Preliminary Machine Tool Orders, a minor indicator which posted a gain of 39.6%.

Federal Reserve chair Janet Yellen didn’t generate much excitement in the markets when she testified before Congress on Tuesday. She said that the Fed plans to continue trimming QE, provided that the employment picture continues to improve and inflation rises. She acknowledged that even though the unemployment rate has improved steadily, the recovery in the labor market is far from complete and the Fed plans to keep interest rates at ultra-low levels. Yellen, who took over as Fed chair on February 1, is expected to continue the policies of her predecessor, Bernard Bernanke. Meanwhile, JOLTS Job Openings, a key event, showed little change in January, with a reading of 3.99 million. This was short of the estimate of 4.04 million. If Thursday’s Unemployment Claims do not meet expectations, the markets could get nervous about the US employment picture.

With the US economy pointed in the right direction, the Federal Reserve has implemented two tapers of $10 billion to the QE scheme, reducing QE to $65 billion each month. We could see another taper when the Fed meets in March. Former Fed chair Bernard Bernanke took his time making the decision, and the taper train will be hard to stop, barring any unexpected downturns in the economy. The Fed plans to wind down QE in $10 billion installments, completing the process by the end of 2014.

USD/JPY for Thursday, February 13, 2014

USD/JPY February 13 at 12:00 GMT

USD/JPY 101.95 H: 102.53 L: 101.87

USD/JPY Technical

• USD/JPY has lost ground in Thursday trade. The pair dropped below the 102 line earlier in the European session.
• 102.53 is the next line of resistance. This is followed by resistance at 103.30, which has held firm since late January.
• 101.19 is providing support. Next is the key level of 100.00, which has remained intact since November.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.65
• Above: 102.53, 103.30, 104.17, 105.70, 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little change in Thursday trading. This is not consistent with what we are seeing from the pair, as the yen has posted gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar switching directions and moving higher against the yen.

The yen has dipped below the 102 line in Thursday trading. We could see some strong movement in the North American session, as the US releases key employment and retail sales data.

USD/JPY Fundamentals

• 13:30 US Core Retail Sales. Estimate 0.1%.
• 13:30 US Retail Sales. Estimate 0.0%.
• 13:30 US Unemployment Claims. Estimate  331K.
• 15:00 US Business Inventories. Estimate 0.4%.
• 15:30 US Natural Gas Storage. Estimate -234B.
• 18:01 US 30-year Bond Auction.

*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.