USD/JPY – US Manufacturing, Consumer Confidence Slide, Yen Above 121

USD/JPY has posted slight gains for a second straight day on Tuesday, as the pair trades slightly above the 121 line in the North American session. In the US, there was disappointing news as Factory Orders and IBD/TIPP Economic Optimism both missed their estimates. The only Japanese event on the schedule, Monetary Base, will be released later on Tuesday.

Last week, the Federal Reserve caught the markets off guard with a hawkish policy statement. The Fed stated that a rate hike was a possibility in December, depending on the strength of employment and inflation numbers. The markets had essentially written off a move by the Fed before 2016, so the statement caused sharp volatility in the currency markets, with the US dollar showing broad gains after the dust had settled. The next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, upcoming key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers will play a critical role in determining whether the Fed presses the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

With the Federal Reserve statement behind us, the markets are once again focused on economic releases. There was much anticipation ahead of the US Advance GDP for the third quarter, which was released on Thursday. As it turned out, this key event didn’t shake up the markets, as the reading of a 1.5% gain was almost identical to the forecast of 1.6%. Still, this figure was much lower than the Q2 Final GDP of 3.9%, pointing to a slowdown in the US economy. Meanwhile, Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand. Will the upcoming Nonfarm Payrolls also beat the forecast? On Friday, US key releases wound up the week on a positive note. Employment Cost Index jumped 0.6%, pointing to an increase in wages for US workers. The UoM Consumer Sentiment, an important gauge of consumer confidence, improved to 90.0 points, within expectations.

USD/JPY Fundamentals

Tuesday (Nov. 3)

• 15:00 US Factory Orders. Estimate -0.8%. Actual -1.0%
• 15:00 US IBD/TIPP Economic Optimism. Estimate 47.5 points. Actual 45.5 points
• All Day – US Total Vehicle Sales. Estimate 17.8M
• 22:50 Japanese Monetary Base. Estimate 36.2%

Upcoming Key Events

Wednesday (Nov. 4)

• 13:15 US ADP Nonfarm Employment Change. Estimate 183K
• 13:30 US Trade Balance. Estimate -42.7B
• 15:00 Federal Reserve Chair Janet Yellen Testifies
• 15:00 US ISM Non-Manufacturing PMI. Estimate 56.6 points
  

USD/JPY for Tuesday, November 3, 2015

USD/JPY November 3 at 15:45 GMT

USD/JPY 121.16 H: 121.23 L: 120.59

USD/JPY Technical

• USD/JPY showed little change in the Asian session. The pair has posted gains in the European and North American sessions.
• 120.40 is an immediate support line.
• 121.50 is a weak resistance line.
• Current range: 120.40 to 121.50

Further levels in both directions:

• Below: 120.40, 118.53, 116.90 and 115.90
• Above: 121.50, 122.40 and 123.74

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Tuesday, consistent with the lack of significant movement from the pair. Long positions retain a commanding majority (58%). This is indicative of trader bias towards the pair continuing to move to higher ground.

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.