USD/JPY – Dollar Flirting With 100 Level Ahead of Key US Employment Releases

USD/JPY is steady in Friday trading, as the pair is testing the important 100 line in the European session. The US markets were closed on Thursday for the July 4th holiday, but will be busy on Friday with the release of two key events – Non-Farm Payrolls and the Unemployment Rate. There are no Japanese releases on Friday.

Japan’s aggressive monetary policy may be bearing some fruit, as Japanese economic indicators are showing improvement and there are signs of inflation in the economy. Tokyo Core CPI, the most important Japanese inflation index, came in above zero, indicating inflation. As well, Japanese consumers’ inflation expectations remained at 3% in Q2, matching the reading for Q1. Manufacturing, housing and retail sales numbers were also solid. On Sunday, the important Tankan indexes, which are released quarterly, were both positive.  If the positive news continues, we could see increased market confidence in the Japanese economy as well as a stronger yen.

US employment data has looked good this week. ADP Non-Farm Payrolls, an unofficial release which precedes the government release on Friday, posted a gain of 188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims came in at 343 thousand, beating the estimate of 345 thousand. The markets will be hoping for further strong employment data on Friday, as the US releases Non-Farm Payrolls and the Unemployment Rate.

There was another major headache for the Eurozone, this time courtesy of Portugal. The country finds itself gripped in a deep political crisis, which sent the euro lower and could have repercussions for the entire Eurozone. The country entered into a bailout agreement back in 2011, worth EUR 78 billion. For its part, Portugal agreed to implement tough austerity measures. However, the economy has not bounced back, as Portugal been stuck in a recession for three years and unemployment is a staggering 18%. Finance Minister Vitor Gaspar, who has been in charge of the austerity drive, shocked the markets by resigning on Monday, and the crisis has intensified with the resignation of a number of other ministers. European stock markets were down, and yields on Portuguese government bonds have jumped, increasing borrowing costs for the country. Prime Minister Pedro Passos Coelho is putting on a brave face, insisting that the government will be able to carry on and there will be no need for early elections.

USD/JPY for Friday, July 5, 2013

USD/JPY 99.98 H: 100.45 L: 99.89

USD/JPY Technical

USD/JPY is testing the 100 level on the upside, as the proximate support and resistance lines (S1 and R1 above) remain intact for now. The 100 line has seen activity in the European session, and this could continue. Will the 100 line break before the end of the trading week? The pair is facing resistance at the 100 level. The next resistance line is stronger, at 100.85. On the downside, the pair continues to receive weak support at 99.57. This is followed by a strong support level at 98.43.

• Current range: 99.57 to 100.00

Further levels in both directions:

• Below: 99.57, 98.43, 97.83, 97.18, 96.03 and 94.91
• Above: 100.00, 100.85, 101.66 and 102.52

OANDA’s Open Positions Ratio

USD/JPY ratio has shown very little activity during the week, and this trend is continuing on Friday. This is reflected in what we are seeing from the pair, which is showing little movement. Long positions continue to dominate the open positions, indicating a strong trader bias towards the dollar moving higher.

USD/JPY is trading quietly, as the significant 100 line is the center of the pair’s attention. We could see some volatility from the pair during the day, as the US releases key employment numbers later on.

USD/JPY Fundamentals

• 12:30 US Non-Farm Employment Change. Estimate 163K.
• 12:30 US Unemployment Rate. Estimate 7.5%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.

*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.