USD/JPY – Yen Moves Higher on Mixed US Numbers

The Japanese yen rally is continuing on Thursday, as USD/JPY has posted modest losses on Thursday. In the North American session, the pair is trading at 118.40. The yen has enjoyed a strong week, gaining about 200 points this week. In economic releases, CPI came in at -0.2%, matching expectations. Core CPI was stronger, with an slight gain of 0.2%. Unemployment Claims surprised with a strong improvement, dipping to 255 thousand, compared to a forecast of 269 thousand. Manufacturing numbers were weak, as both the Empire State Manufacturing Index and Philly Fed Manufacturing Index softened in October and missed expectations. There were no major releases out of Japan. Traders should keep a close eye on Friday’s key releases out of the US, Consumer Sentiment and JOLTS Jobs Openings.

Federal Reserve policymakers are strongly divided on the question of a rate hike in 2015. This was underscored on Monday by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. Clearly, Brainard is of the view that the Fed should take its time and proceed with caution. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases, such as GDP or employment numbers, which match or beat expectations.

A very different view was put forth earlier in the week by another FOMC member, Dennis Lockhart. Lockhart, considered a centrist on monetary policy, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.

USD/JPY Fundamentals

Thursday (Oct. 15)

• 4:30 Japanese Revised Industrial Production. Estimate -0.5%. Actual -1.2%.
• 4:30 Japanese Tertiary Industry Activity. Estimate 0.1%. Actual 0.0%.
• 12:30 US CPI. Estimate -0.2%. Actual -0.2%.
• 12:30 US Core CPI. Estimate 0.1%. Actual 0.2%.
• 12:30 US Unemployment Claims. Estimate 269K. Actual 255 thousand.
• 12:30 US Empire State Manufacturing Index. Estimate -7.3 points. Actual -11.4 points.
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.8 points. Actual -4.5 points.
• 14:30 Fed FOMC Member William Dudley Speaks.
• 14:30 US Natural Gas Storage. Estimate 92B. Actual 100B.
• 15:00 US Crude Oil Inventories. Estimate 2.2M. Actual 7.6M.
• 19:30 US Federal Budget Balance. Estimate 93.8B. 

Upcoming Key Events

Friday (Oct. 16)

• 6:35 BOJ Governor Haruhiko Kuroda Speaks.
•  14:00 US Preliminary UoM Consumer Sentiment. Estimate 88.8 points.
•  14:00 US JOLTS Job Openings. Estimate 5.77M.

USD/JPY for Thursday, October 15, 2015

USD/JPY October 15 at 16:45 GMT

USD/JPY 118.32 H: 119.17 L: 118.05

USD/JPY Technical

• USD/JPY posted losses late in the Asian session. The pair has showed some volatility in the European and North American sessions.
• 118.53 has switched to a resistance role. It is a weak line.
• 116.90 is a strong support level.
• Current range: 116.90 to 118.53

Further levels in both directions:

• Below: 116.90, 115.90, 113.86 and 112.48
• Above: 1118.53, 120.40, 121.50 and 122.40

OANDA’s Open Positions Ratio

USD/JPY ratio has a solid majority of long positions (65%), indicative of trader bias towards the US dollar reversing directions and moving to higher ground.

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.