USD/JPY – Little Change as Dollar trades Above 101

USD/JPY continues to trade at multi-year levels, with the pair trading in the mid-101 range in Tuesday’s European session. In economic releases, there was good news from Japanese Corporate Goods Price Index, which posted a 0.0% reading, its best showing in over a year. Japanese 30-year bonds posted an average yield of 1.78%, which was higher than the previous auction, which has a yield of 1.49%. Preliminary Machine Tool Orders continues to look sluggish, posting a decline of 24.1%. Later on Tuesday, Tertiary Industry Activity will be released. In the US, there are only two releases on Tuesday.

After a few failed tries, the US dollar finally laid claim to the psychologically important 100 summit last week. The pair had come close a couple of times, but retracted on each occasion. It was the first time since May 2009 that the pair found itself in three digit levels. Not surprisingly, Japan’s trading partners are not happy with the weakening yen, as they struggle to keep their exports competitive. As well, the weak currency makes things difficult for Japanese importers, who have seen prices for foreign goods and services jump dramatically. The Japanese currency has already depreciated 14% against the dollar in 2013, and with the BOJ moving full steam ahead with aggressive monetary easing, we can expect the yen to continue to point downwards.

There was positive news from one of Japan’s inflation releases, as the Corporate Goods Price Index climbed out of negative territory for the first time since April 2012, posting a reading of 0.0%. This beat the estimate of a 0.2% decline. With the Japanese government and Bank of Japan fixated on stamping out inflation, this release is certainly a positive sign. If additional inflation releases point to some modest inflation in the economy, we could see the yen improve.

The US ran into some turbulence in April with disappointing key releases, but we are seeing some improvement, notably from employment figures. This has raised speculation that the Fed might adjust or even terminate its QE program, in which it buys $85 billion in assets every month. Terminating the QE program is dollar positive, and the US dollar was broadly stronger against all the major currencies late last week. The markets will be looking for any clues as to the Fed ending QE, which would likely push the dollar higher. So far, the Federal Reserve has not make any comments that could be construed as indicating any change from the present course of action.

USD/JPY for Tuesday, May 14, 2013

USD/JPY 101.58 H: 101.73 L: 101.26

USD/JPY Technical

USD/JPY has edged lower, and is trading in the mid-101 range. The pair is facing resistance at 101.81. This is a weak line and could face more pressure if the US dollar makes a move towards the 102 level. There is a stronger line of resistance at 102.57. On the downside, the pair is testing support at 100.54. This is followed by support at the 100 level. This line has strengthened as the pair trades at higher levels.

• Current range: 100.54 to 101.81

Further levels in both directions:

• Below: 100.54, 100, 99.57, 98.45 and 97.24
• Above: 101.81, 102.57, 103.75 and 104.94

OANDA’s Open Positions Ratio

USD/JPY is showing almost no change in the Tuesday session. This is consistent with what we are seeing from the pair, which is not showing much movement. The ratio remains evenly divided between open long and short positions, indicating a split among traders as to what to expect next from the volatile pair.

USD/JPY continues to trade at multi-year highs, and the 102 line remains within striking distance. We could see the pair continue to trade quietly, as there are no major events out of the US later today.

USD/JPY Fundamentals

• 3:45 Japanese 30-year Bond Auction. Actual 1.78%.
• 6:00 Japanese Preliminary Machine Tool Orders. Actual -24.1%.
• 11:30 US NFIB Small Business Index. Estimate 89.9 points.
• 12:30 US Import Prices. Estimate -0.5%.

*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.