USD/JPY remains at multi-year highs, as the pair trades in the high-104 range in Friday trading. In economic news on Thursday, US Unemployment Claims dropped sharply and posted a three-week low. In Japan, there was a host of releases, with mixed results. Household Spending and Preliminary Industrial Production were well below their estimates, while Retail Sales posted their sharpest gain in over three years. Inflation continues to move upwards, as inflation indicators met expectations. On Friday, Average Cash Earnings edged above the estimate. Today's US highlight is Crude Oil Inventories.
There was more good news out of the US this week, as Unemployment Claims recovered following two disappointing releases. The key employment indicator fell to 338 thousand last week, compared to 379 thousand in the previous release. The estimate stood at 346 thousand. With the Federal Reserve poised to begin its long-awaited QE taper next month, employment releases have taken on added significance. If the US labor market continues to improve, the Fed could decide on another taper early in 2014, which would give a boost to the US dollar against its major rivals.
There was some holiday cheer from US releases on Tuesday, as manufacturing and housing numbers pointed upwards. Core Durable Goods Orders posted a strong gain of 1.2%, its best showing since April. The key manufacturing indicator had posted four consecutive declines, so the sharp gain was welcome news. Durable Goods Orders bounced back from a sharp decline in October with a gain of 3.5%, well above the estimate of 1.7%. New Homes Sales also impressed with a five-month high, climbing to 464 thousand. The estimate stood at 449 thousand.
Japan's economy is heading in the right direction, but the Japanese consumer has not jumped on to the bandwagon just yet tight. Household Spending dropped to a paltry 0.2% in November. The markets had expected a much better release, with the estimate standing at 1.9%. Preliminary Industrial Production also fell, dropping to o.1%, well off the estimate of 0.6%. There was good news as well, as Retail Sales jumped 4.0%, its sharpest gain since August 2010. The estimate stood at 2.9%. Inflation continues to rise, as Tokyo Core CPI posted a respectable gain of 0.7%, matching the forecast.
The Bank of Japan released the minutes of its most recent policy meeting on Thursday and there was a consensus that the economic recovery is continuing. However, two board members expressed concern about the pace of growth, as GDP in Q3 showed a gain of just 0.3%, well off the Q2 reading of 0.9%. Even if GDP expands in Q4, there is concern that a sales tax hike in April could slow growth in 2014. The minutes also indicated that one policy member expressed doubt that the BOJ would reach its inflation target of 2% by 2015. However, BOJ Governor Haruhiko Kuroda insists that the country is on track to meet this goal and he reiterated this on Thursday in a meeting with Prime Minister Shinzo Abe.
In its Monetary Policy Statement last week, the BOJ said it was holding steady with its monetary base and asset purchase programs. The BOJ said it will continue to increase the monetary base by 60-70 trillion yen annually and the purchase of Japanese government bonds by 50 trillion each year. The Bank's aggressive monetary policy has revived the economy and put the breaks on deflation, but has severely weakened the yen, which has lost 17% of its value against the greenback in 2013.
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- USD/JPY December 27 at 11:15 GMT
- USD/JPY 104.81 H: 105.03 L: 10.65
- USD/JPY is trading quietly in Friday trading. The pair briefly crossed above the 105 line early in the Asian session.
- 104.17 continues to provide support. This is followed by support at 103.30.
- On the upside, there is resistance at 105.70. This is followed by a resistance line at 106.85, which has remained intact since September 2008.
- Current range: 104.17 to 105.70
Further levels in both directions:
- Below: 104.17, 103.30, 102.53, 101.19 and 100.00
- Above: 105.70, 106.85, 107.73 and 108.77
OANDA's Open Positions Ratio
USD/JPY ratio almost unchanged in Friday trading. This is consistent with what we are seeing from the pair, which is showing little movement. The ratio is almost evenly split between short and long positions, reflecting a lack of bias in trader sentiment as to which direction the yen will move.
USD/JPY continues to trade at high levels and has already tested the 105 line. The pair has not shown much activity in Friday trading and this pattern could continue during the North American session.
USD/JPY Fundamentals
- 13:30 Japanese Average Cash Earnings. Estimate 0.4%. Actual 0.5%.
- 15:30 US Natural Gas Storage. Exp. -177B.
- 16:00 US Crude Oil Inventories. Exp. 0.5%.