USD/JPY – Yen Fights Back As US Unemployment Claims Misses Estimate

The Japanese yen has dashed out of the starting gates in 2014, gaining over 100 points against the US dollar. In Friday’s European session, the yen is trading in the mid-104 range. Taking a look at economic news, Unemployment Claims and ISM Manufacturing PMI both met market expectations. On Friday, a host of FOMC members will be speaking, including outgoing Fed chairman Bernard Bernanke. The markets will be more than interested in what the Fed policymakers have to say, with the Fed starting its long-awaited QE taper in January. There are no Japanese releases on Friday.

US Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand. The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP could impact the next Fed decision as to QE, after 2013 ended with QE tapering. While it was a small move, lowering asset purchases from $85 billion to $75 billion each month, the Fed did make a significant change its monetary policy, and this could have a significant positive impact on the US dollar.

The Bank of Japan released the minutes of its most recent policy meeting last week, and there was a consensus that the economic recovery is continuing. However, two board members expressed concern about the pace of growth, as GDP in Q3 showed a gain of just 0.3%, well off the Q2 reading of 0.9%. Even if GDP expands in Q4, there is concern that a sales tax hike in April could slow growth in 2014. The minutes also indicated that one policy member expressed doubt that the BOJ would reach its inflation target of 2% by 2015. However, BOJ Governor Haruhiko Kuroda insists that the country is on track to meet this goal and he reiterated this last week in a meeting with Prime Minister Shinzo Abe. The BOJ’s aggressive monetary policy has revived the economy and put the breaks on deflation, but has severely weakened the yen, which lost 17% of its value against the greenback in 2013.

USD/JPY for Friday, January 3, 2014

USD/JPY January 3 at 11:45 GMT

USD/JPY 104.40 H: 104.87 L: 104.08

USD/JPY Technical

• USD/JPY continues to lose ground in Friday trading. The pair dropped in the Asian session to a low of 104.08 and has moved higher in European trading.
• 104.17 continues to provide support, but this line has weakened and could break if the yen continues to move upwards. This is followed by a strong support line at 103.30.
• On the upside, there is resistance at 105.70. This line has some breathing room as the pair trades at lower levels. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
• Current range: 104.17 to 105.70

Further levels in both directions:

• Below: 104.17, 103.30, 102.53, 101.19 and 100.00
• Above: 105.70, 106.85, 107.73 and 108.77

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Friday trading. This is not consistent with what we are seeing from the pair, as the yen continues to move to higher ground. Long positions have a majority, indicating trader bias towards the dollar reversing directions and moving higher.

The yen continues to improve and is within striking distance of the 104 level. With no major US releases on today’s schedule, it could be a quiet session for USD/JPY as we wrap up the trading week.

USD/JPY Fundamentals

• 15:30 US Natural Gas Storage. Estimate -125B.
• 16:00 US Crude Oil Inventories. Estimate -2.3M.
• All Day – US Total Vehicle Sales. Estimate 16.0M.
• 17:45 US FOMC Member Charles Plosser Speaks.
• 18:15 US FOMC Member Jeremy Stein Speaks.
• 19:30 US Fed Chairman Bernard Bernanke Speaks.

*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.