USD/JPY – Modest Losses Ahead of ADP Non-Farm Payrolls

USD/JPY has posted slight losses on Wednesday, erasing the gains we saw a day earlier. In the European session, the pair is trading in the low-101 range. In economic news, Japanese Average Cash Earnings posted a gain and met expectations. Over in the US, it will be a busy day, with two key releases – ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI.

With the Federal Reserve continuing its tapering program, US employment releases will be under the market microscope. A strong ADP Non-Farm Employment Change release later in the day would be an important indication that the US employment front is improving and that could give the dollar a boost. This will be followed on Friday with the official Non-Farm Employment Change release.

In the US, ISM Manufacturing PMI, a key event, was a major disappointment in January. The index came in at 51.3 points, a sharp drop from the December reading of 57.0. This was well below the estimate of 56.2 points and enabled the yen to post sharp gains at the expense of the greenback. The markets will be looking for better news from the ISM Non-Manufacturing PMI later on Wednesday. If this index also disappoints, the US dollar could continue to lose ground.

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%.

USD/JPY for Wednesday, February 5, 2014

USD/JPY February 5 at 11:40 GMT

USD/JPY 101.22 H: 101.69 L: 100.10

USD/JPY Technical

• USD/JPY has lost ground in Wednesday trading. The pair touched a low of 101.10 earlier in the European session. Will the pair move into 100 territory?
• 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, 101.19 is under strong pressure. Next is the key level of 100.00, which has remained 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 has reversed directions, pointing to gains in short positions in Wednesday trading. This is consistent with what we are seeing from the pair, as the yen has posted modest gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar moving to higher ground.

The US dollar has lost ground in Wednesday trading. With the US releasing key employment and services data later today, we could stronger movement from USD/JPY in the North American session.

USD/JPY Fundamentals

• 1:30 Japanese Average Cash Earnings. Estimate 0.7%. Actual 0.8%.
• 13:15 US ADP Non-Farm Employment Change. Estimate 191K.
• 14:00 US Final Services PMI. Estimate 56.6 points.
• 15:00 US ISM Non-Farm Manufacturing PMI. Estimate 53.6 points.
• 15:00 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Crude Oil Inventories. Estimate. 2.2M.
• 17:30 US FOMC Member Charles Plosser Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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