USD/JPY – Drops Below 102 As Yen Picks Up Steam

The Japanese yen continues to improve as we start the new trading week. In Monday’s European session, USD/JPY is trading just below the 102 line. The yen has now gained about 150 points since the middle of last week. In the US, today’s focus is on manufacturing releases, highlighted by ISM Manufacturing PMI. Monday’s sole Japanese release is Monetary Base.

In Japan, last week’s inflation indicators were positive, as Tokyo Core CPI remained unchanged at 0.7%, matching the forecast. National Core CPI edged up to 1.3%, surpassing the estimate of 1.2%. At the same time, inflation still has a long way to go to reach the BOJ’s target of 2.0%. Household Spending, an important gauge of consumer spending, rose 0.7%, up nicely from 0.2% a month earlier. However, this fell short of the estimate of 1.2%. Preliminary Industrial Production followed suit, rising to 1.1% compared to just 0.2% in November. This points to improvement in the manufacturing sector, although the markets had expected a gain of 1.3%.

Over in the US, Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining on Thursday was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the 2.8% gain in Q3. So where is the US economy headed? With GDP posting strong gains but employment numbers struggling, the recovery does not seem to be creating many new jobs, which could seriously hamper long-term economic growth.

In a highly anticipated decision, the Federal Reserve pressed the taper trigger for a second month in a row last week . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernard Bernanke’s last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.

USD/JPY for Monday, February 3, 2014

USD/JPY February 3 at 12:15 GMT

USD/JPY 101.89 H: 102.41 L: 101.67

USD/JPY Technical

• USD/JPY has posted losses on Monday as the yen continues to gain ground. The pair dropped below the 102 line early in the European session.
• 102.53 is providing resistance. This line has some breathing room as the dollar has weakened. 103.30 is the next line of resistance.
• On the downside, the pair is receiving support at 101.19. Next is the key level of 100.00, which has held 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 pointing to gains in long positions in Monday trading. This is not consistent with what we are seeing from the pair, as the yen has posted gains against the dollar. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar moving to higher ground.

The yen continues to improve as USD/JPY has dropped below the 102 line. The dollar is under pressure in the European session.

USD/JPY Fundamentals

• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:00 US Final Manufacturing PMI. Estimate 53.8 points.
• 15:00 US ISM Manufacturing PMI. Estimate 56.2 points.
• 15:00 US Construction Spending. Estimate 0.3%.
• 15:00 US ISM Manufacturing Prices. Estimate 54.2 points.
• All Day – Total Vehicle Sales. Estimate 15.6M.
• 23:50 Japanese Monetary Base. Estimate 47.2%.

*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.