USD/JPY – Yen Remains Within Striking Distance of 100

USD/JPY continues to trade in a narrow range on Wednesday. The pair is trading in the mid-99 range in the European session. In economic news, US releases started the week strongly, as the ISM Manufacturing PMI climbed to its highest level in over two years. Today’s highlight is US Trade Balance, and the markets are bracing for a larger deficit in August. There are no releases out of Japan on Wednesday.

The US released its first major event of the week on Tuesday. ISM Manufacturing PMI did not disappoint, climbing to its highest level since May 2011. The index rose to 55.7 points in August, beating the estimate of 54.2. Predictably, the strong figure has increased talk about QE tapering in September. With the Federal Reserve not letting on when it might start tapering QE, the markets are hungry for any news which could affect the timing of QE tapering. US releases, especially employment data, will continue to be scrutinized under the market microscope.

A US military strike against Syria is on hold, but tensions in the Middle East remain high. A military operation had seemed imminent last week, but President Obama announced on the weekend that he will seek Congressional approval before taking any action against Syria. With Congress in recess until September 9th, a military strike could be delayed until mid-September or even later. Russia has warned the US not to take any unilateral action against Syria, so we can expect the volatile situation to continue, bringing with it market volatility.

Over in Japan, Average Cash Earnings posted a gain of 0.4%, its best showing since March. However, this was well off the forecast of a 0.8% gain. On Sunday, Capital Spending, which is released on a quarterly basis, was up sharply. The indicator climbed from -3.9% in Q1 to a flat 0.0% in Q2. The estimate stood at -2.0%. This marks the first time that the indicator has beaten the forecast since Q1 of 2012. The Japanese economy is showing signs of improvement, but business and consumer spending releases will have to produce sustained gains if the economy is to recover from years of stagnation. The Bank of Japan will release a Monetary Policy Statement on Thursday, and this market-mover could jolt USD/JPY out of its current drifting.

USD/JPY for Wednesday, September 4, 2013

USD/JPY September 4 at 10:55 GMT

USD/JPY 99.49 H: 99.80 L: 99.42

USD/JPY Technical

• USD/JPY is trading quietly in Wednesday trading. The pair touched a high of 99.80 late in the Asian session but then retracted.
• On the downside, the pair continues to test support at 99.45. This is followed by support at 98.43. This line has some breathing room as the pair trades at higher levels.
• USD/JPY is facing resistance at the round number of 100. This line has remained firm since late July, but has been weakening. 100.85 is a stronger line of resistance.
• Current range: 99.45 to 100

Further levels in both directions:

• Below: 99.45, 98.43, 97.83, 97.18, 96.20 and 95.60
• Above: 100.00, 100.85, 101.66 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in Wednesday trading. This is reflected in the current movement of USD/JPY, as the pair trades in a narrow range. The ratio continues to have a strong majority of long positions, indicative of strong trader bias towards the dollar moving to higher ground.

USD/JPY continues to trade in the mid-99 range, within striking distance of the critical 100 line. Will the pair continue to move upwards? The US will release Trade Balance, a key event, later in the day. This release could impact on USD/JPY, if the reading is not in line with market expectations.

USD/JPY Fundamentals

• 11:30 US Challenger Job Cuts.
• 12:30 US Trade Balance. Estimate -38.7B.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points.
• All Day – US Total Vehicle Sales. Estimate 15.8B.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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