USD/JPY – Yen Steady in Light Holiday Trade

The Japanese yen is stable on Tuesday, as USD/JPY trades in the mid-108 range late in the European session. Trade is light as the Japanese markets are closed for a national holiday. In the US, today’s highlight is the Richmond Manufacturing Index. The indicator is expected to post another strong reading.

USD/JPY enjoyed another strong week, buoyed by dollar gains after the Federal Reserve statement on Wednesday. The Fed statement reaffirmed that interest rates would remain ultra-low for a “considerable time” after the asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.

US Existing Home Sales didn’t impress in August, slipping to 5.05 million, compared to 5.15 million in the previous release. This was way off the estimate of 5.21 million. The indicator had exceeded the estimate in the past three releases, so the weak numbers disappointed the markets. We’ll get a look at New Home Sales on Wednesday.

The US economy may be much more robust than that of the Eurozone, but it is also grappling with weak inflation levels. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation levels could delay the Federal Reserve’s plan to raise interest rates, which is widely expected to take place in the first half of 2015.

USD/JPY for Tuesday, September 23, 2014

USD/JPY September 23 at 12:40 GMT

USD/JPY 108.58 H: 108.84 L: 108.25

USD/JPY Technical

• USD/JPY edged lower late in the Asian session, but has recovered in European trading.
• On the downside, 108.58 is fluid. 107.68 is stronger.
• 109.82 is a strong resistance line.
• Current range: 108.58 to 109.82

Further levels in both directions:

• Below: 108.58, 107.68, 106.85, 105.44 and 104.17
• Above: 109.82, 110.68, 112.48, 113.68 and 114.65

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Tuesday, reversing the direction seen a day earlier. This is consistent with the pair’s movement, as the yen has posted small losses. The ratio has a majority of short positions, indicative of trader bias towards the yen moving to higher ground.

USD/JPY Fundamentals

• 13:00 US HPI. Estimate 0.4%.
• 13:20 US FOMC Member Jerome Powell Speaks.
• 13:45 US Flash Manufacturing PMI. Estimate 58.1 points.
• 14:00 US Richmond Manufacturing Index. Estimate 10 points.
• 18:00 US FOMC Member Narayana Kocherlakota Speaks.

*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.