After strong gains on Thursday, USD/JPY has settled down, as the pair tests the 99 line in Friday trading. It’s a very light schedule on Friday, with today’s highlight being US New Home Sales. The markets will be hoping for a repeat of Existing Home Sales earlier this week, which posted an impressive gain and easily beat the estimate. There are no Japanese releases scheduled on Friday.
There has been plenty of speculation about when the Federal Reserve will scale back its QE program, and the markets were hopeful that the release of the FOMC minutes earlier in the week would shed some light on the Fed’s plans. The minutes didn’t contain any dramatic news, but the US dollar was broadly stronger following the release. Fed officials were described as “broadly comfortable” with plans to taper QE, but remain split on the timing of such a move. The policymakers noted that recent US economic data was “mixed” and all members agreed that it was still too early to scale back the current QE program, under which the Fed purchases $85 billion in assets each month. The markets are anticipating that the Fed will make a move in the near future, and traders should be prepared for a scaling back of QE as early as September.
Meanwhile, the Kansas City Federal Reserve is currently holding its annual economic summit in Jackson Hole, Wyoming. The conference attracts central bankers, finance ministers and academics, and has been a market-mover on previous occasions. Federal Reserve chair Bernard Bernanke will not be attending, but other high-profile Federal Reserve policymakers are participating. The markets are monitoring the conference, hoping for some clues about QE tapering and future monetary policy.
The markets tend to be quiet in late August, and Japan posted only two releases this week. On Tuesday, All Industries Activities looked weak, recording a decline of -0.6%. Although this did match the estimate, it was the indicator’s worst showing since March. Earlier this week, Trade Balance was a major disappointment, as the deficit ballooned from -0.60 trillion yen to -0.94 trillion yen. The markets had expected a smaller deficit of -0.83 million yen. We’ll get a better picture of the health of the Japanese economy next week, with the release of consumer spending, manufacturing and inflation numbers.
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USD/JPY August 23 at 10:35 GMT
USD/JPY 98.92 H: 99.13 L: 98.74
USD/JPY is unchanged in Friday trading. In the Asian session, the pair briefly pushed across the 99 line but was unable to consolidate these gains. The pair continues to test the 99 line in European trading. USD/JPY faces resistance at 99.45. This is followed by resistance at the all-important 100 line.
On the downside, USD/JPY continues to receive support at 98.43. This is not a strong line, and could face pressure if the yen recovers from its recent losses. This is followed by support at 97.83.
- Current range: 98.43 to 99.45
- Below: 98.43, 97.83, 97.18, 96.20, 95.60 and 94.29
- Above: 99.45, 100.00, 100.85 and 101.66
USD/JPY ratio is pointing to movement towards short positions. This is not reflected in the current movement of USD/JPY, which is unchanged in Friday trading. The movement in the ratio could be an early indication that we will see the pair breakout and move to lower ground.
USD/JPY is very quiet, as the pair trades very close to the 99 line. The US will release key housing data later in the day, and this could impact on USD/JPY if the reading is not in line with market expectations.
USD/JPY Fundamentals
- 14:00 US New Home Sales. Exp. 487K.
- Day 2 – Jackson Hole Symposium.