USD/JPY – Yen Surge Continues Ahead of US Non-Farm Payrolls

The Japanese yen is enjoying an excellent week, and continues to post gains against the broadly-weakened dollar. USD/JPY has dropped to the low-96 range, the pair’s lowest level since mid-April. The  Nikkei continues to show volatility, and this has helped the yen push higher. In economic news, Japanese Leading Indicators rose to 99.3%, its highest level since October 2011. In the US, Unemployment Claims improved, and almost matched the forecast. On Friday, the US releases two major employment events – Non-Farm Payrolls and the Unemployment Rate.

On Wednesday, Prime Minister Abe outlined his plan for reviving the Japanese economy. Abe discussed economic growth as the “third arrow” in the fight against deflation, together with fiscal and monetary stimulus. However, the speech received a cold response from the markets, as Abe was short on substance, and failed to provide any specifics on new stimulus measures. The Nikkei fell, which was good news for the yen, as nervous investors snapped up the safe-haven currency. A Japanese government spokesman brushed aside the market’s tepid reaction to Abe’s speech, saying that the government’s policies were not aimed at pleasing the financial markets.

The markets can be forgiven for having trouble trying to figure out the direction of the US economy. The US continues to post mixed numbers, and on Wednesday, ADP Non-Farm Payrolls looked sluggish. The key indicator has struggled, and has now missed the estimate for three consecutive releases. The indicator came in at 135 thousand, well off the forecast of 171 thousand. However, Unemployment Claims bounced back, posting a reading of 346 thousand, very close to the estimate of 345 thousand. We’ll get a clearer picture of the employment picture later today, as the US releases the Unemployment Rate and Non-Farm Payrolls.

Will the Federal Reserve scale back QE? Although the Fed hasn’t made any changes so far, Fed policymakers, including Fed Chair Bernanke, continue to hint that QE could be scaled back in the next few months. With the US continuing to alternate between good and bad economic releases, the Fed may continue to hold off on any changes to QE before it is convinced that the US economy is improving. The Fed has repeatedly stated that it wants to see an improvement in the labor picture before taking any action, so this week’s employment releases could play a major role in what action, if any, the Fed takes with regard to QE.

USD/JPY for Friday, June 7, 2013

USD/JPY 96.11 H: 97.51 L: 95.55

USD/JPY Technical

USD/JPY continues to lose ground on Friday, as the pair trades slightly above the 95 line. The pair is testing support at 96.03. This line could fall if the yen continues to improve. There is stronger support at 94.91. On the upside, the pair is facing resistance at 97.18. This line has strengthened as the pair trades at lower levels. This is followed by resistance at 98.94, which is protecting the 95 line.

• Current range: 96.03 to 97.18

Further levels in both directions:

• Below: 96.03, 94.91, 94.02 and 92.73
• Above: 97.18, 98.94, 99.57, 100.00, 100.66

OANDA’s Open Positions Ratio

USD/JPY ratio has taken a break, and is unchanged in the Friday session. This is not reflected in the current movement of the pair, as the yen continues to post gains against the US dollar. If USD/JPY continues to show volatility, we can expect to see some movement in the ratio as well.

The yen continues to take advantage of a weak dollar,, and is testing the 96 line. Will the upward momentum continue? We could see more volatility from the pair today, as the US releases two major employment events.

USD/JPY Fundamentals

• 5:00 Japanese Leading Indicators. Estimate 98.8%. Actual 99.3%.
• 12:30 US Non-Farm Employment Change. Estimate 167K.
• 12:30 US Unemployment Rate. Estimate 7.5%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 19:00 US Consumer Credit. Estimate 13.4B.

*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.