By Kenny Fisher
The US dollar has posted slight gains against the Japanese yen in Thursday trading. In the European session, USD/JPY is trading in the mid-102 range. In economic news, the US Federal Reserve announced another $10 billion reduction in its QE program. Thursday will be a busy day in the US, with three major releases on the schedule - Advance GDP, Unemployment Claims and Pending Home Sales. In Japan, Retail Sales posted a strong gain of 2.6%, but fell short of the estimate. We'll see a host of Japanese data later in the day, highlighted by Tokyo Core CPI and Household Spending.
Most analysts had predicted that the Federal Reserve would go ahead and reduce QE for a second straight month, and that's exactly what transpired on Wednesday. In a policy statement, the Federal Reserve reduced its stimulus program by another $10 billion, lowering QE to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday's policy meeting was Bernard Bernanke's last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.
Earlier in the week, the Bank of Japan stated that it will hold course, expanding the monetary base by 60-70 trillion yen annually and continuing its monetary easing until the inflation target of 2.0% is reached. The Bank noted that the Japanese economy continues to recover at a moderate pace and that inflation has picked up. This was underscored by the Corporate Services Price Index, which continues to climb, posting a gain of 1.3%, above the estimate of 1.1%. However, inflation still has a long way to go to meet the BOJ's target, with inflation for 2013 falling below 1.0%. Tokyo Core CPI, the most important inflation indicator, is expected to remain at 0.7%.
US manufacturing numbers were sluggish in December. Core Durable Goods Orders posted another decline, its sixth in seven readings. The key manufacturing release fell 1.6%, well short of the estimate of a 0.7% gain. It was the indicator's sharpest drop since August 2012. There was no relief from Durable Goods Orders, which plunged 4.3%, nowhere near the estimate of a 1.9% gain. CB Consumer Confidence looked much sharper, climbing to 80.7 points, up from 78.1 a month earlier. The estimate stood at 78.3 points.
USD/JPY for Thursday, January 30, 2014
USD/JPY January 30 at 12:15 GMT
USD/JPY 102.54 H: 102.57 L: 102.09
- USD/JPY is steady in Thursday trading. The pair touched a low of 102.13 early in the European session but has moved to higher ground.
- 103.30 is the next resistance line. This is followed by resistance at 104.17.
- On the downside, the pair is testing support at 102.53. There is stronger support at 101.19, which has remained intact since late November.
- Current range: 102.53 to 103.30
Further levels in both directions:
- Below: 102.53, 101.19, 100.00 and 99.57
- Above: 103.30, 104.17, 105.70, 106.85 and 107.73
OANDA's Open Positions Ratio
USD/JPY ratio is pointing to gains in long positions on Thursday, reversing the trend we saw a day earlier. This is consistent with what we are seeing from the pair, as the dollar has posted slight gains. Long positions continue to comprise a solid majority in the USD/JPY ratio, indicating trader bias towards the dollar continuing to move towards higher ground.
The pair has not shown much activity in Thursday trading. This could change in the North American session, as the US releases three key events, highlighted by Unemployment Claims.
- 13:30 US Advance GDP. Estimate 3.3%.
- 13:30 US Unemployment Claims. Estimate 331K.
- 13:30 US Advance GDP Price Index. Estimate 1.2%.
- 15:00 US Pending Home Sales. Estimate -0.1%.
- 15:30 US Natural Gas Storage. Estimate -225B.
- 23:15 Japanese Manufacturing PMI.
- 23:30 Japanese Household Spending. Estimate 1.2%.
- 23:30 Japanese Tokyo Core CPI. Estimate 0.7%.
- 23:30 Japanese National Core CPI. Estimate 1.2%.
- 23:30 Japanese Unemployment Rate. Estimate 3.9%.
- 23:30 Japanese Preliminary Industrial Production. Estimate 1.3%.
*Key releases are highlighted in bold