USD/JPY – Yen Fails To Gain On Excellent Japanese Data

USD/JPY has posted slight gains on Friday. In the European session, the pair is trading in the mid-102 range. On the release front, all eyes are fixed upon US Nonfarm Payrolls, which will be released later on Friday. On Thursday, Unemployment Claims was a major disappointment, as the indicator jumped to a nine-week high. In Japan, Household Spending was outstanding. There are no Japanese releases on Friday.

Nonfarm Payrolls is a critical release, and traders should be prepared for some movement from USD/JPY after its publication later on Friday. The indicator has been improving throughout 2014, and the markets are expecting the upward trend to continue, with a rosy estimate of 216 thousand. Earlier in the week, ADP Nonfarm Payrolls looked sharp, jumping to 220 thousand, marking a four-month high. This easily beat the estimate of 203 thousand. Will the official Nonfarm Payrolls follow suit on Friday? A strong showing from the key indicator could prop up the dollar and push down gold, which has been struggling of late.

On Thursday, Japanese Household Spending shocked the markets with a surge of 7.2% in April, crushing the estimate of 1.7%. Analysts were concerned that this important consumer spending indicator might take a hit from the steep hike in the sales tax which kicked in on April 1. The superb gain indicates that the Japanese consumer continues to spend and reinforced this week’s statement from the Bank of Japan that the economy is not showing ill effects from the rise in the sales tax. The policy statement also stated that the current monetary base would continue and said that it expects to meet its inflation target in 2015. The BOJ’s target for inflation is 2% and inflation indicators have been steadily improving.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What did catch the markets’ attention was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

USD/JPY for Friday, May 2, 2014

USD/JPY May 2 at 11:30 GMT

USD/JPY 102.46 H: 102.56 L: 102.26

USD/JPY Technical

• USD/JPY has posted slight gains in Friday trade. The pair touched a high of 102.56 earlier in the European session.
• The pair is testing resistance at 102.53. Will the pair break above this line? 103.07 is a stronger resistance line.
• 101.19 continues to provide 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, 105.70 and 106.85.

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions in Friday trade. This is not consistent with the pair’s movement, as the dollar has posted slight gains. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar posting further gains.

The pair is trading quietly in the mid-102 range. We could see some stronger movement from USD/JPY in the North American session, following the release of Nonfarm Employment Change later on Friday.

USD/JPY Fundamentals

• 12:30 US Non-Farm Employment Change. Estimate 216 thousand.
• 12:30 US Unemployment Rate. Estimate 6.6%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 14:00 US Factory Orders. Estimate 1.5%.

*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.