USD/JPY – Yen Dips Below 98 Line

The Japanese yen continues to look strong and is firmer in Tuesday trading. USD/JPY is trading in the high-97 range in the European session. Monday saw some weak releases out of both Japan and the US. In Japan, Preliminary Industrial Production dropped sharply, hitting a nine-month low. In the US, Pending Home Sales posted a decline, although the drop was less than forecast. On Tuesday, Japan’s only release is Manufacturing PMI. The highlight of the day is US CB Consumer Confidence.

Japanese releases have shown improvement lately, but Monday’s numbers were disappointing. Household Spending posted a second straight decline, as it dropped 0.4%. This was well of the estimate of 1.2%. Preliminary Industrial Production looked awful, posting a decline of -3.3%. This was the sharpest drop since October 2012. The estimate stood at -1.4%. There was some good news, as the Unemployment Rate dropped from 4.1% to 3.9%. It marked the first time that the rate has dipped below the 4.0% in over six years, and points to an improving labor market.

One of the cornerstones of the Japanese government’s economic policy, popularly referred to as Abenomics, has been a battle to eliminate deflation, which has hobbled the economy for some 15 years. It has taken quite a bit of time, but inflation indicators are finally pointing upwards. Last week, Tokyo Core CPI improved rose from 0.2% to 0.3%, matching the forecast. Not to be outdone, National Core CPI jumped from 0.0% to 0.4%, also matching the estimate. Another inflation release, Corporate Services Price Index, posted a gain of 0.4%. Although this fell short of the estimate, it did mark the indicator’s best reading in 2013. Stronger inflation would indicate increased spending and greater economic activity, which could bolster the weak Japanese yen.

Over in the US, the direction of the housing sector is unclear, with recent releases pointing in all directions. On Monday, Pending Home Sales pointed to a decline of -0.4%, certainly not a strong release. Last week, Existing home sales fell to 5.08 million, way off the estimate of 5.27 million. However, New Home Sales showed strength, jumping from 476 thousand to 496 thousand, easily beating the estimate of 482 thousand. This was its best showing in five years. So where do we stand? With these inconclusive results, the markets will have to wait for the August housing releases, which hopefully will provide a clearer picture of the health and direction of the US housing industry.

USD/JPY for Tuesday, July 30, 2013

USD/JPY July 30 at 12:50 GMT

USD/JPY 97.88 H: 98.46 L: 97.76

USD/JPY Technical

USD/JPY pushed above the 98 line in the Asian session, but retracted in European trade . The pair is testing support at 97.83. This line could fall if the yen can muster some strength. The next support line is 97.18.

On the upside, 98.43 continues to provide resistance. This is followed by a stronger line at 99.45, protecting the 100 level.

• Current range: 97.83 to 98.43

Further levels in both directions:

• Below: 97.83, 97.18, 96.20 and 95.60
• Above: 98.43, 99.45, 100.00, 100.85, 101.66 and 102.52

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little change in the Tuesday session. This is consistent with what we are seeing from the pair, which has not shown much movement. Long positions continue to enjoy a sizeable majority of open positions, indicating that trader sentiment is biased in favor of a move upwards by USD/JPY.

USD/JPY continues to trade quietly close to the 98 line. Will the pair break out from this level? With the US releasing key consumer confidence numbers later in the day, we could see some movement from the pair.

USD/JPY Fundamentals

• 13:00 US S&P/CS Composite-20 HPI. Estimate 12.4%.
• 14:00 US CB Consumer Confidence. Estimate 81.1 points.
• 23:15 Japanese Manufacturing PMI.

*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.