USD/JPY – Yen Posts Gains On Mixed US Numbers

USD/JPY has moved lower in Wednesday trading, as the pair trades in the low-102 range. It’s a busy day on the release front in both Japan and the US. Japanese Preliminary Industrial Production fell short of the estimate, while Average Cash Earnings easily beat the forecast. The BOJ policy statement stated that the current monetary base would continue and said that it expects to meet its inflation target in 2015. In the US, ADP Nonfarm Payrolls looked  strong but Advance GDP slipped badly in March. Later in the day, the Federal Reserve releases a policy statement, and we could see another trim to QE.

The ADP Nonfarm Payrolls were released on Wednesday, ahead of the critical official NFPs later in the week. The news was positive, as the indicator jumped to 220 thousand, marking a four-month low. This easily beat the estimate of 203 thousand. Advance GDP couldn’t keep pace, as the key indicator’s upward swing came to a crashing halt, with a Q1 gain of just 0.1%, compared to a 3.2% reading in Q4. This as well off the estimate of 1.2%. Is the US economy stalling? The weak reading could be a result of a harsh winter, but this will be of little consolation to the markets, and the dollar could lose ground against its major rivals.

The markets are keeping a close eye on the Federal Reserve, which will issue a policy statement later in the day. The Fed is expected to trim QE by another $10 billion, which would reduce the asset purchase scheme to $45 billion. If US numbers remain steady, the Fed plans to wind up QE before the end of 2014, at which time the guessing game of when interest rates might rise will begin in earnest. Meanwhile, further tapers to QE represent a vote of confidence in the US economy, so the greenback could post gains against the major currencies following another trim.

With Japan hiking the national sales tax from 5% to 8% on April 1, consumers were expected to spend and spend more in March, before prices jumped. Analysts weren’t disappointed, as Retail Sales jumped 11%, its best showing since March 1997. This was in line with expectations, as the estimate stood at 10.9%. With inflation indicators pointing higher, the government has shifted attention to country’s huge deficit of over $10 billion. The sales tax is expected to raise tax revenue and help lower the deficit, but there are concerns that the economy could take a downturn if spending slows down in the private sector.

USD/JPY for Wednesday, April 30, 2014

USD/JPY April 30 at 13:20 GMT

USD/JPY 102.28 H: 102.66 L: 102.24

USD/JPY Technical

• USD/JPY has posted losses in Wednesday trade.
• 102.53 has reverted to a resistance role as the yen has improved. 103.07 is the next line of resistance.
• 101.19 is a strong support line.
• 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 long positions, reversing the direction we saw a day earlier. This is not consistent with the pair’s movement, as the yen has posted gains. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar moving upwards.

The yen has posted gains on Wednesday. USD/JPY remains under pressure in the North American session as the 102 line is within striking distance on the downside.

USD/JPY Fundamentals

• 1:30 Japanese Average Cash Earnings. Estimate 0.2%. Estimate 0.7%.
• 3:51 Bank of Japan Monetary Policy Statement.
• 5:00 Japanese Housing Starts. Estimate -2.8%, Actual -2.9%.
• 6:00 Bank of Japan Outlook Report.
• 6:32 Bank of Japan Press Conference.
• 12:15 US ADP Nonfarm Employment Change. Estimate 203K. Actual 220K.
• 12:30 US Advance GDP. Estimate 1.2%. Actual 0.1%.
• 12:30 US Advance GDP Price Index. Estimate 1.6%. Actual 1.3%.
• 12:30 US Employment Cost Index. Estimate 0.5%. Actual 0.3%.
• 13:45 US Chicago PMI. Estimate 56.6 points.
• 14:30 US Crude Oil Inventories. Estimate 1.3M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.

*Key releases are highlighted in bold

*All release times are GMT

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