USD/JPY – Dollar Broadly Higher After Strong Housing Data, FOMC Minutes

The US dollar posted strong gains against the yen on Thursday, continuing the trend which began on Wednesday. USD/JPY has gained over 100 points since early Wednesday and is trading in the high-98 range. The US currency received a boost from a sharp release of US Existing Home Sales, which hit their highest levels in almost four years, as well as the release of the minutes of the FOMC’s most recent policy meeting. Thursday’s highlight is US Unemployment Claims. There are no Japanese releases on Thursday.

There has been plenty of speculation about when the Federal Reserve will scale back its QE program, and the markets were hopeful that the release on Wednesday of the FOMC minutes of its most recent policy meeting would shed some light on the Fed’s plans. The minutes didn’t contain any dramatic news, but the US dollar was broadly stronger and gained ground against the Japanese yen. Fed officials were described as “broadly comfortable” with plans to taper QE, but remain split on the timing of such a move. The policymakers noted that recent US economic data was “mixed” and all members agreed that it was still too early to scale back the current QE program, under which the Fed purchases $85 billion in assets each month. The markets are anticipating that the Fed will make a move in the near future, and traders should be prepared for a scaling back of QE as early as September.

The markets tend to be quiet in late August, and Japan posted only two releases this week. On Tuesday, All Industries Activities looked weak, recording a decline of -0.6%. Although this did match the estimate, it was the indicator’s worst showing since March. Earlier this week, Trade Balance was a major disappointment, as the deficit ballooned from -0.60 trillion yen to -0.94 trillion yen. The markets had expected a smaller deficit of -0.83 million yen. We’ll get a better picture of the health of the Japanese economy next week, with the release of consumer spending, manufacturing and inflation numbers.

USD/JPY for Thursday, August 22, 2013

USD/JPY August 22 at 11:35 GMT

USD/JPY 98.70 H: 98.81 L: 97.75

USD/JPY Technical

USD/JPY continues to push higher in Thursday trading. The pair barreled above the 98 line in the Asian session and is moving higher in European trading. USD/JPY faces resistance at 99.45. This line is protecting the all-important 100 level. This is followed by resistance at 100.00.

On the downside, USD/JPY is receiving support at 98.43, which has reverted from a resistance line. This weak line could face pressure if the yen recovers from its most recent losses. This is followed by support at 97.83.

• Current range: 98.43 to 99.45

Further levels in both directions:

• Below: 98.43, 97.83, 97.18, 96.20, 95.60 and 94.29
• Above: 99.45, 100.00, 100.85 and 101.66

OANDA’s Open Positions Ratio

USD/JPY ratio continues to have a strong majority of long positions, which outnumber short positions 2:1. This indicates a strong bias in trader sentiment towards the US dollar improving against the yen.

The US dollar is rallying against the yen, thanks to strong US housing numbers and the FOMC minutes. The US will release Unemployment Claims later in the day, and this key release could impact on USD/JPY.

USD/JPY Fundamentals

• 12:30 US Unemployment Claims. Estimate 329K.
• 13:00 US Flash Manufacturing PMI. Estimate 54.1 points.
• 13:00 US HPI. Estimate 0.6%.
• 14:00 US CB Leading Index. Estimate 0.5%.
• 14:30 US Natural Gas Storage. Estimate 68B.
• Day 1 – Jackson Hole Symposium.
• 19:15 Treasury Secretary Jack Lew Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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