USD/JPY – Yen Tests 93 Line as Slide Continues

USD/JPY is showing some movement in Monday trading, as the pair tests the 93 level. The Japanese currency continues to look weak, and the markets are prepared for the downward spiral to continue. The new trading week is starting on a quiet note, with only two economic releases. The US wrapped up last week with some key releases. Employment numbers were a disappointment, as Non-Farm Payrolls did not meet the estimate and the unemployment rate moved higher. However, consumer sentiment and manufacturing data looked sharp. In Japan, it was a disappointing week, with most of the readings falling below market expectations. The negative trend continued on Monday, with the Monetary Base failing to meet the estimate. In the US, today’s sole release is Factory Orders.

The Japanese yen continues to swoon, as USD/JPY briefly pushed above the 93 level in Monday’s European session. The yen has now posted declines for 12 straight weeks, shedding 12% of its value against the US dollar. The Japanese currency has now claimed the dubious honor of being the world’s worst-performing currency in 2013. The Bank of Japan has quickly towed the line with the government’s new economic program, introducing new monetary easing measures. The BOJ has doubled its inflation target to 2%, and announced open-ended asset purchases, which will begin in 2014. BOJ Deputy Governor Hirohide Yamaguchi, who will step down in April, reiterated the government’s claim that the central bank’s monetary easing steps are not directly aimed at weakening the yen. Despite these statements, it is clear that the yen is not receiving any support from either the government or the BOJ, and many analysts are saying that a 95 level is only a matter of time. 

US indicators continue to keep the markets guessing about the extent of the US recovery. Last week produced more mixed data. GDP was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, last week’s consumer sentiment and manufacturing PMI data was very strong. UoM Consumer Sentiment climbed to 73.8 points, well above the estimate of 71.4 points. ISM Manufacturing PMI hit an eight-month high of 53.1 points, easily exceeding the forecast of 50.8 points. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on where the US economy is headed. In Japan, the new week started on a sour note as the Monetary Base posted a smaller gain than last month, of 10.9%. This fell well below the market estimate of 13.2%.

The US Federal Reserve was in the spotlight last week, as the powerful US central bank met for a two-day policy meeting. There were no surprise developments, as the Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. The Fed noted that economic growth had stalled, but was confident that the pause was a temporary one. This laid to rest speculation that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. The Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment hovering close to 8%, we’re unlikely to see this target met anytime soon.

USD/JPY for Monday, February 4, 2013

USD/JPY February 4 at 12:45 GMT

 92.91 H: 93.18 L: 92.49 

USD/JPY Technical

The Japanese yen continues to sag, as USD/JPY tests the 93 line. The pair is receiving support at 92.53. This is followed by a stronger line at 91.94. On the upside, there is weak resistance at 93.14. This line was briefly breached earlier on Monday, and could face more pressure during the day. This is followed by resistance at 93.73.

• Current range: 92.53 to 93.14.

Further levels in both directions:

• Below: 92.53, 91.94, 91.30, 91.94, 90.91, 90.23, 89.85 and 89.31.
• Above: 93.14, 93.73, 94.11, 94.59, 95.27, 96.06.

OANDA’s Open Position Ratios

The USD/JPY ratio is back in action and is indicating movement towards long positions. This is being reflected in the pair’s current movement as the yen continues to lose ground against the US dollar. The ratio continues to almost evenly split between the long and short components, as trader sentiment remains evenly divided as to whether the yen will continue to slide, or will the pair undergo a correction and move to lower levels.

The yen had another dismal week, receiving no help from struggling Japanese economic indicators. Will the dollar continue to hammer away at the hapless yen? With only two releases on Monday, we may not see much volatility from the pair.

USD/JPY Fundamentals

• Sunday, 23:50: Japanese Monetary Base. Estimate 13.2%. Actual 10.9%.
• Monday, 15:00: US Factory Orders. Estimate 2.3%.

*Key releases are highlighted in bold

*All release times are GMT

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