USD/JPY -Yen Dips Ahead of US Manufacturing PMI

The Japanese yen has lost ground on Monday, as the US dollar is broadly higher at the start of the new trading week. Early in the North American session, the pair is trading above the 102 line. On the release front, the yen failed to take advantage of a solid Japanese Capital Spending release. Japanese Final Manufacturing PMI came in just shy of the 50-point level, matching the forecast. In the US, today’s highlight is ISM Manufacturing PMI. The index has been steadily moving higher throughout 2014, and the upward trend is expected to continue in the May release.

In Japan, the week started on the right foot, as Capital Spending posted its strongest gains in almost two years, with a gain of 7.4% in Q1. This easily beat the estimate of 5.7%. Last week, Japanese inflation indicators were solid, as Tokyo Core CPI gained 2.8% and National Core CPI soared 3.1%, its highest reading since February 1991. The news was not as positive in other sectors, as Household Spending dropped by -4.6%, and Preliminary Industrial Production came in at -2.5%. Both of these releases fell short of their estimates.

Over in the US, last week’s numbers were mostly a disappointment. Preliminary GDP, the primary gauge of economic activity, posted its first decline since Q2 of 2009. The indicator came in at -1.0% for Q1, worse than the estimate of -0.6%. Harsh winter conditions took their toll on the US economy in Q1, and analysts expect a rebound in Q2. After a strong gain in March, Pending Home Sales softened, coming in at 0.4%. This was nowhere near the gain of 1.1%. On a brighter note, Employment Claims dropped to 300 thousand, easily beating the estimate of 321 thousand.

USD/JPY for Monday, June 2, 2014

USD/JPY June 2 at 15:10 GMT

USD/JPY 102.10 H: 102.29 L: 101.86

USD/JPY Technical

• USD/JPY has gained ground on Monday.
• 102.53 has weakened as a resistance line as the pair trades at higher levels. The next resistance line is at 103.07, which has held firm since early April.
• 101.19 is providing strong support.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.97.
• Above: 102.53, 103.07, 104.17 and 105.70.

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions in Monday trading, reversing the trend we saw on Friday. This is not consistent with the pair’s current movement, as the yen has lost ground. The ratio is made up of a majority of long positions, indicating trader bias towards the dollar continuing to move upwards.

USD/JPY has started off the week with gains, breaking above the 102 line. The yen is under pressure in the North American session.

USD/JPY Fundamentals

• 1:35 Japanese Final Manufacturing PMI. Estimate 49.9 points. Actual 49.9 points.
• 12:40 US Treasury Secretary Jack Lew Speaks.
• 13:45 US Final Manufacturing PMI. Estimate 56.2 points.
• 14:00 US ISM Manufacturing PMI. Estimate 55.7 points.
• 14:00 US Construction Spending. Estimate 0.8%.
• 14:00 US ISM Manufacturing Prices. Estimate 56.8 points.

*Key releases are highlighted in bold

*All release times are GMT

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