USD/JPY – Dollar Gains As Japanese GDP Dips

USD/JPY has posted modest gains on Monday as the pair trades just shy of the 102 line in the European session. In economic news, Japanese GDP dipped to a four-month low, disappointing the markets. The sole Japanese release on Monday, Revised Industrial Production, bounced back with a solid gain in January. There are no US releases to start off the new trading week, as the US markets are closed for a holiday.

Japanese Preliminary GDP, which is released on a quarterly basis, started off the week on a disappointing note. The indicator posted a modest gain of 0.3% in Q4, down from 0.5% in the previous reading. This was well short of the estimate of 0.7% and was the lowest reading we’ve seen since Q1 of 2013. The dollar posted gains on the news as it trades close to the 102 line. Meanwhile, 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 last week the Corporate Goods Price Index posted a healthy gain of 2.4%, matching the forecast.

Over in the US, the markets had little to cheer about on Thursday as all three US key releases disappointed. Unemployment Claims rose to 337 thousand, above the estimate of 331 thousand. This reading comes on the heels of JOLTS Job Openings earlier in the week, which also missed market expectations. Core Retail Sales dropped to 0.0%, a nine-month low. The estimate stood at 0.1%. Retail Sales brought no relief, slipping to -0.4%, short of the estimate of 0.0%. Despite the weak releases, the dollar didn’t lose much ground against the yen.

Federal Reserve chair Janet Yellen, who is brand new on the job, didn’t generate much excitement in the markets when she testified before Congress last week. 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.

USD/JPY for Monday, February 17, 2014

USD/JPY February 17 at 13:10 GMT

USD/JPY 101.91 H: 101.99 L: 101.39

USD/JPY Technical

• USD/JPY has moved higher in Monday trading. The pair touched a high of 101.99 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 unchanged in Monday trading. This is not consistent with what we are seeing from the pair, as the dollar has posted gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar continuing to move higher against the yen.

The yen has lost ground in Monday trading. The pair is steady in the European session. With the US markets closed, it could be an uneventful North American session.

USD/JPY Fundamentals

• 4:30 Japanese Revised Industrial Production. Estimate 1.1%. Actual 0.9%.

*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.