USD/JPY – Steady As US Retail Sales Slide

USD/JPY is not showing much movement, as the pair trades slightly above the 102 line. In economic news, US Core Retail Sales and Retail Sales were a disappointment, as both softened in April. Japanese Corporate Goods Price Index will be released later in the day.

US Retail Sales and Core Retail Sales are key gauges of consumer spending, and are carefully tracked by the markets. Both indicators were weak in April. Core Retail Sales dropped to 0.0%, well off the estimate of 0.6%. Retail Sales followed suit, with a paltry gain of just 0.1%, compared to an estimate of 0.5%. The weak numbers could hurt the dollar, which has posted gains against the yen in the past week.

The crisis in Ukraine remains in the headlines as the Western countries face off against Russia. Last week, Russian President Vladimir Putin surprised observers when he urged pro-Russian separatists to postpone their referendum on independence. However, the separatists shrugged off Putin’s request and went ahead with referendums in two cities in eastern Ukraine on Sunday. Not surprisingly, voters in this pro-Russian region voted in favor of self-rule. The Ukraine government and Western countries denounced the referendums as illegal and we could see further sanctions imposed against Russia. Elections scheduled in Ukraine for the end of May remain in jeopardy and there are mounting fears that the country could slide into civil war. If the turmoil worsens, we can expect some volatility from the markets.

There were no surprises from Federal Reserve Chair Janet Yellen last week, who gave a cautious thumbs-up to the economic recovery in testimony before Congress. Yellen said that the US economy has improved, but noted two sore spots – the employment market and inflation which remains below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue to stay low for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future tapers to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

Last week, the Bank of Japan released minutes of its last policy meeting. Bank policymakers expressed concern that the economic recovery is exerting some upward pressure on prices, but the rise might not be enough to hit the BOJ’s inflation target of 2%. The economy seems to have weathered the April sales hike nicely, and Household Spending posted a sharp gain in April, pointing to strong consumer spending. With inflation indicators continuing to point higher, the government will be focusing more attention on the nation’s staggering debt load, which is in excess of $10 trillion dollars.

USD/JPY for Tuesday, May 13, 2014

USD/JPY May 13 at 12:30 GMT

USD/JPY 102.34 H: 102.36 L: 102.16

USD/JPY Technical

• USD/JPY is steady in Tuesday trade.
• On the upside, 102.53 is the next line of resistance. This is a weak line which could face pressure during the day. There is stronger resistance at 103.07.
• 101.19 is providing strong support.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.97.
• Above: 102.53, 103.07, 104.17, 105.70 and 106.85.

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions in Tuesday trading. This is not consistent with the pair’s current lack of movement. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar breaking out and moving upwards.

The pair is trading in the  low-102 range on Tuesday. USD/JPY is showing little movement in the European session.

USD/JPY Fundamentals

• 11:30 US NFIB Small Business Index. Estimate 94.6 points. Actual 95.2 points.
• 12:30 US Core Retail Sales. Estimate 0.6%. Actual 0.0%
• 12:30 US Retail Sales. Estimate 0.5%. Actual 0.1%.
• 12:30 US Import Prices. Estimate +0.4%. Actual -0.4%.
• 14:00 US Business Inventories. Estimate 0.4%.
• 23:50 Japanese Corporate Goods Price Index. Estimate 4.1%.

*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.