USD/JPY – Yen at 106, Shrugs Off Weak Manufacturing Report

The Japanese yen has posted slight losses on Monday, as the yen continues to show limited movement. USD/JPY is trading at the 106 line. On the release front, Japanese BSI Manufacturing Index posted a sharp decline of 11.1 points, missing expectations. There are no US releases on the schedule. On Tuesday, the US will release retail sales reports.

The Japanese manufacturing sector remains in trouble, and manufacturing indicators continue to post sharp declines. The BSI Manufacturing Index came in at -11.1 points, its weakest reading in eight months. This follows soft readings last week from Core Machinery Orders and Preliminary Machine Tool Orders. PPI, which measures inflation in the manufacturing sector, continues to point to deflation. PPI dropped 4.2% in April and has failed to post a gain in over a year. This negative trend comes as no surprise, given that Japanese manufacturing numbers remain weak, pointing to a manufacturing sector in decline. Earlier in the week, Japanese Final GDP posted a respectable gain of 0.5% in the first quarter, edging above the initial government report of a 0.4% for Q1. The GDP release is certainly good news for the government, which recently had an about-face and postponed a sales tax hike from April 2017 to October 2019. This delay is intended to help struggling households and rejuvenate sluggish consumer spending, a key component of economic activity. Still, the economy is on shaky ground, as global demand remains soft and a strong yen could hamper the struggling export sector.

The April Nonfarm Payrolls report, which posted a weak gain of just 38 thousand, sent the US dollar tumbling and raised concerns about the strength of the US labor market. However, these concerns should be laid to rest after key job numbers last week were solid and beat expectations. On Wednesday, JOLTS Job Openings improved to 5.79 million, easily beating the forecast of 5.67 million. Unemployment Claims followed suit with a strong reading. The indicator dropped to 264 thousand, compared to an estimate of 269 thousand. Significantly, this marked the lowest jobless report in six weeks. With the Federal Reserve mulling over a rate hike in the next few months, employment numbers will be especially significant, and any unexpected reading could result in volatility in the currency markets.

USD/JPY Fundamentals

Monday (June 13)

• 19:50 Japanese BSI Manufacturing Index. Estimate -2.1. Actual -11.1

Upcoming Key Events

Tuesday (June 14)

• 8:30 US Core Retail Sales. Estimate 0.4%
• 8:30 US Retail Sales. Estimate 0.4%

*Key events are in bold

*All release times are EDT

USD/JPY for Monday, June 13, 2016

USD/JPY June 13 at 8:20 EDT

Open: 106.48 Low: 105.72  High: 106.64 Close: 106.08

USD/JPY Technical

• USD/JPY posted losses in the Asian session and has been choppy in European trade
• 107.16 has some breathing room in resistance
• 105.87 was tested earlier in support and is a weak line
• Current range: 105.87 to 107.16

Further levels in both directions:

• Below: 105.87, 104.99, 103.73
•  Above: 107.16, 108.37, 109.87 and 110.66

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing little movement on Monday, consistent with the lack of movement from USD/JPY. Long positions have a strong majority (67%), indicative of trader bias towards USD/JPY reversing directions and moving to higher ground.

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.