USD/JPY – Yen Under Pressure Despite Strong Japanese Data

The US dollar continues to trade above the 100 level, and has posted modest gains in Wednesday trading. USD/JPY is trading in the mid-100 level in the European session. The yen remains under pressure, and has dropped to its lowest levels since mid-July. The US posted another weak employment release on Tuesday, as US JOLTS Jobs Openings fell short of the estimate. President Obama addressed the nation about the Syrian crisis, saying that the US was postponing military action while there was a possibility that a diplomatic solution could be reached. In Japan, the BSI Manufacturing Index soared to a four-year high, and Corporate Goods Price Index beat the estimate. Core Machinery Orders will be released later in the day.

QE tapering continues to be a hot topic, but recent weak US employment numbers may cause a delay. Tuesday’s JOLTS Job Openings looked weak, coming in at 3.69 million, way off the estimate of 3.96 million. Last week’s Non-Farm Payrolls came in at 169 thousand, missing the estimate of 178 thousand. The Unemployment Rate dropped from 7.4% to 7.3%, but this improvement is not all that significant, given the low participation rate in the labor force. There has been talk of the Fed reducing QE as early as September, but we’re unlikely to see any action if employment numbers don’t improve. Chicago Fed President Charles Evans has hinted that we could see some action on this front from the Fed before the end of the year.

The Syrian crisis has taken on a new twist, as the US and Russia are looking for a diplomatic solution to the crisis. Under the proposed plan, Syria would destroy its entire arsenal of chemical weapons. President Obama spoke on US television on Monday and said that he would delay any military action as long as a diplomatic solution was possible, but that a strike against Syria was still on the table. If the diplomatic efforts gain momentum and the crisis eases, we could see the safe-haven dollar lose ground.

Over in Japan, there was good news on the manufacturing and inflation fronts. BSI Manufacturing Index surged from 5.0 points in July to 15.2 in August, crushing the estimate of 7.2. This was the strongest reading since May 2009. Corporate Goods Price Index posted its best reading in two years, with a gain of 2.4%. This strong reading points to increasing inflation, a cornerstone of the government’s economic platform.

The Bank of Japan released its minutes from its August policy meeting on Monday. The minutes show that BOJ policymakers are confident that the aggressive monetary stimulus program is succeeding in boosting the economy. The BOJ noted that wages and household incomes have increased a positive sign for increased consumer spending. Although the economy is improving, the public debt continues to balloon. The government is considering a sales tax increase in 2014, in order to reduce the debt. Such a step will not be popular, but will be easier for the government to introduce if the economy is improving.

USD/JPY for Wednesday, September 11, 2013

USD/JPY September 11 at 11:20 GMT

USD/JPY 100.33 H: 100.60 L: 100.09

USD/JPY Technical

• USD/JPY has settled down after sharp gains on Tuesday. The pair touched a high of 101.62 late in the Asian session, but has retracted slightly.
• On the downside, 100 continues to provide support. This line is not strong, and could see further action if the yen reverses direction. This is followed by support at 99.45.
• USD/JPY is facing weak resistance at 100.85. This is followed by stronger resistance at 101.66. This line has remained intact since late May.
• Current range: 100 to 100.85

Further levels in both directions:

• Below: 100.00, 99.45, 98.43, 97.83, 97.18 and 96.20
• Above: 100.85, 101.66, 102.53 and 103.26

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in Wednesday trading. This is reflected in the pair’s current movement, as the pair is not showing much movement. The ratio continues to have a solid majority of long positions, indicative of strong trader bias towards the dollar continuing to move to higher ground.

The US dollar continues to look strong, and has pushed into the mid-100 range. With no major releases out of the US today, we could see the pair continue to trade quietly in the mid-100 range.

USD/JPY Fundamentals

• 1:00 President Obama Speaks.
• 14:00 US Wholesale Inventories. Estimate 0.3%.
• 14:30 US Crude Oil Inventories. Estimate -2.2M.
• 17:00 US 10-year Bond Auction.
• 23:50 Japanese Core Machinery Orders. Estimate 2.5%

*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.