USD/JPY – Yen Jumps After Weak US Manufacturing PMI

USD/JPY has steadied on Tuesday, following sharp gains by the yen to start off the week. The yen took full advantage of weak US manufacturing data on Monday and climbed over 100 points. In Tuesday’s European session, USD/JPY is trading in the low-101 range. In economic news, Japanese Monetary Base beat the estimate. In the US, today’s highlight is Factory Orders.

In the US, ISM Manufacturing PMI, a key event, looked weak in January. The index came in at 51.3 points, a sharp drop from the December reading of 57.0. This was well below the estimate of 56.2 points and enabled the yen to post sharp gains at the expense of the greenback. The markets will be looking for better news from the ISM Non-Manufacturing PMI on Wednesday. If this index also disappoints, the US dollar could continue to lose ground.

In Japan, last week’s inflation indicators were positive, as Tokyo Core CPI remained unchanged at 0.7%, matching the forecast. National Core CPI edged up to 1.3%, surpassing the estimate of 1.2%. At the same time, inflation still has a long way to go to reach the BOJ’s target of 2.0%. Household Spending, an important gauge of consumer spending, rose 0.7%, up nicely from 0.2% a month earlier. However, this fell short of the estimate of 1.2%. Preliminary Industrial Production followed suit, rising to 1.1% compared to just 0.2% in November. This points to improvement in the manufacturing sector, although the markets had expected a gain of 1.3%.

In a highly anticipated decision, the Federal Reserve pressed the taper trigger for a second month in a row last week . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernard Bernanke’s last hurrah, as Janet Yellen took over as Fed chair on February 1.

USD/JPY for Tuesday, February 4, 2014

USD/JPY February 4 at 11:30 GMT

USD/JPY 101.32 H: 101.49 L: 100.75

USD/JPY Technical

• USD/JPY is slightly higher in Tuesday trading. The pair touched a low of 101.75 late in the Asian session but has bounced higher in European trading.
• 102.53 is providing resistance. This line has some breathing room as the dollar has weakened. 103.30 is the next line of resistance.
• 101.19 has weakened as the yen pushes higher and could be tested during the day. Next is the key level of 100.00, which has held intact since November.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.65
• Above: 102.53, 103.30, 104.17, 105.70, 106.85

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Tuesday trading, continuing the trend we saw in the previous day. This is consistent with what we are seeing from the pair, as the dollar has posted slight gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar moving to higher ground.

The US dollar has steadied after a steep slide on Monday. In Tuesday’s European session, the dollar has edged higher.

USD/JPY Fundamentals

• 3:45 Japanese 10-year Bond Auction. Actual 0.60%.
• 15:00 US Factory Orders. Estimate -1.9%.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 46.1 points.

*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.