USD/JPY has had a quiet week and this trend is continuing in Wednesday trading. In the European session, the pair is trading in the mid-97 range. It’s a very quiet start to the week, with just two US releases on the schedule – Crude Oil Inventories and Existing Home Sales. There are no Japanese releases on Wednesday.
The markets tend to be quiet in late August, and Japan posted only two releases this week. On Tuesday, All Industries Actvities 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.
There has been plenty of speculation about when the Federal Reserve will scale back its QE program. Currently, the Fed is purchasing $85 billion in assets every month, and Fed chair Bernard Bernanke has indicated that the Fed plans to taper QE if the US economy continues to improve. However, Bernanke has been vague about when the Fed might act, leading to speculation and uncertainty in the markets. There has been talk about the Fed tapering QE as early as September and the FOMC minutes could shed some light on the Fed’s intentions. Since tapering QE is a dollar-positive event, any hints in the minutes about scaling back QE could boost the US dollar.
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USD/JPY August 21 at 11:50 GMT
USD/JPY 97.46 H: 97.68 L: 97.12
USD/JPY is trading quietly on Wednesday. There is resistance at 97.83. This line is not strong and could face pressure if the US dollar shows any improvement. There is stronger resistance at 98.43.
On the downside, USD/JPY is receiving support at 97.18. This line was briefly breached in the Asian session. This is followed by support at 96.20.
- Current range: 97.18 to 97.83
- Below: 97.18, 96.20 and 95.60 and 94.29
- Above: 97.83, 98.43, 99.45, 100.00, 100.85 and 101.66
USD/JPY ratio continues to have a strong majority of long positions, which outnumber short positions 2:1. This indicates a strong bias in trader sentiment towards the US dollar improving against the yen.
We haven’t seen much action from USD/JPY this week, but that could change with the release of the FOMC minutes, as any clues about QE tapering could shake up the markets. As well, the US releases Existing Home Sales, a key event.
USD/JPY Fundamentals
- 14:00 US Existing Home Sales. Estimate 5.15M.
- 14:30 US Crude Oil Inventories. Estimate -1.6M.
- 18:00 US FOMC Meeting Minutes.