USD/JPY – Yen Steady As Fed Holds The Course

USD/JPY has posted modest losses in Thursday trading. The pair is trading in the low-98 range in Thursday’s European session. In economic news, ADP Non-Farm Payrolls slumped to a six-month low, as US employment numbers continue to disappoint. As well, the Federal Reserve released a statement that it would maintain QE at current levels, given the performance of the US economy. Thursday is busy, and the major release of the day is Unemployment Claims. In Japan, Average Cash Earnings bounced back in September, climbing to 0.1%, which easily beat the estimate of -0.5%. Housing Starts jumped 19.4%, an eleven-month high. There were no surprises as the Bank of Japan maintained its stimulus program.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

US employment data has struggled in recent releases, and there was no relief from ADP Non-Farm Payrolls on Wednesday. The key index dropped in September to 130 thousand, compared to 166 thousand the month before. This was well off the estimate of 151 thousand. It is the indicator’s lowest level showing six months and underscores that the labor market is struggling to create new jobs. The markets will get another look at key employment data, with the release of Unemployment Claims later on Thursday. The markets are expecting an improvement from last week’s reading. US releases other than employment indicators are also pointing downwards, as inflation, consumer confidence and housing releases have not looked sharp this week. If confidence in the US economy starts to weaken, we could see the US dollar lose ground.

In Japan, there were no unexpected moves from the BOJ, which announced in a policy statement that it would continue its monetary easing policy. The Bank has been expanding the monetary base by 60-70 trillion yen each year, and plans to maintain this level. The Bank forecasts that inflation will rise to 1.9% in 2015, which is within the BOJ’s target of 2.0%. The government’s radical fiscal and monetary policy has created inflation after years of deflation, which has hobbled the economy. However, the Japanese yen has dropped sharply as a result, as the currency trades close to the 100 level.

USD/JPY for Thursday, October 31, 2013

USD/JPY October 31 at 12:15 GMT

USD/JPY 98.25 H: 98.51 L: 98.17

USD/JPY Technical

• USD/JPY is slightly lower in Thursday trading, as the pair trades in the low-98 range.
• On the downside, 98.15 is providing support. It is a weak line and could fall if the yen shows any upward movement. This is followed by strong support at 97.18.
• On the upside, the pair is facing resistance at 98.92. This line is followed by the key level of 100, which has held firm since mid-September.
• Current range: 98.15 to 98.92

Further levels in both directions:

• Below: 98.15, 97.18, 96.00, 95.06 and 94.20
• Above: 98.92, 100, 101.19 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in Wednesday trading. This is reflected in the movement of the pair, which is showing little movement. The ratio continues to be dominated by long positions, indicative of a strong trader bias towards the US dollar moving higher.

USD/JPY is trading quietly on Thursday. We could see some increased activity from the pair if the Unemployment Claims reading is not within market expectations.

USD/JPY Fundamentals

• 1:30 Japanese Average Cash Earnings. Estimate -0.5%. Actual 0.1%.
• 4:14 Bank of Japan Monetary Policy Statement.
• 5:00 Japanese Housing Starts. Estimate 12.6%. Actual 19.4%.
• 6:00 Bank of Japan Outlook Report.
• 7:24 Bank Of Japan Press Conference.
• 12:30 US Unemployment Claims. Exp. 341K.
• 13:00 US Treasury Secretary Jack Lew Speaks.
• 13:45 US Chicago PMI. Exp. 55.1 points.
• 14:30 US Natural Gas Storage. Exp. 35B.

*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.