USD/JPY - Dollar Breaks Above 103 As Japanese Manufacturing Numbers Slide

 |  Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/JPY keeps on rolling, as it barreled past the 103 line in Monday trading. The yen has now coughed up about 150 pips in less than a week. In economic news, Japanese Preliminary Industrial Production tumbled, dropping to an eight-month low. We'll get a look at the important Tankan indexes later on Monday. In the US, today's sole data release is Chicago PMI. As well, Federal Reserve chair Janet Yellen will speak at an event in Chicago.

Japanese releases kicked off the week with a whimper. On Sunday, Manufacturing PMI lost ground, falling to 53.9 points. Preliminary Industrial Production dropped by 2.3% last month, an eight-month low. This surprised the markets, which had expected a strong gain of 3.6%. Housing Starts didn't look much better, with a gain of just 1.0%, its worst showing since August 2012.

US Unemployment Claims continued to impress last week. The key indicator dropped to 311 thousand, its lowest level in over three months. The estimate was 326 thousand, marking the fourth straight week that the reading has come in below the forecast. The news was not as good from Pending Home Sales, with a reading of -0.8%. This disappointed the markets, which had expected a small gain of 0.1%. Earlier in the week, New Home Sales also lost ground in February, and concern is bound to increase about the health of the US housing industry. Final GDP posted a gain of 2.6% in Q4, just shy of the estimate of 2.7%. This was lower than the Q3 gain, but is indicative of a growing economy.

Ukraine's economy is in shambles as a result of the four-month political crisis which led to the ouster of the government and the Russian annexation of the Crimean region. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by as much as 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.

USD/JPY for Monday, March 31, 2014

Forex Rate Graph 21/1/13

USD/JPY March 31 at 14:50 GMT

USD/JPY 103.34 H: 103.43 L: 102.79

USD/JPY Technical

S3 S2 S1 R1 R2 R3
101.19 102.53 103.30 104.17 105.70 106.85
Click to enlarge
  • USD/JPY continues to move higher. The pair has touched a high of 103.42 early in the North American session.
  • 104.17 is the next resistance line. This is followed by 105.70, which has not been tested since October 2008.
  • On the downside, 103.3o is under strong pressure. The next support line is 102.53.
  • Current range: 103.30 to 104.17

Further levels in both directions:

  • Below: 103.30, 102.53, 101.19, 100.00 and 99.57
  • Above: 104.17, 105.70, 106.85 and 107.80.

OANDA's Open Positions Ratio

USD/JPY ratio is showing gains in short positions on Monday, continuing the trend we saw last week. This is not consistent with the pair's movement, as the dollar rally continues. Long positions make up a majority of the open positions in the ratio, indicating trader bias towards the dollar continuing to move higher.

USD/JPY has pushed into 103 territory, and the yen remains under pressure in the North American session.

USD/JPY Fundamentals

  • 5:00 Japanese Housing Starts. Estimate 5.2%. Actual 1.0%.
  • 13:45 US Chicago PMI. Estimate 59.2 points.
  • 13:55 US Federal Reserve Chair Janet Yellen Speaks.
  • 23:50 Japanese Tankan Manufacturing Index. Estimate 19 points.
  • 23:50 Japanese Tankan Non-Manufacturing Index. Estimate 24 points.

*Key releases are highlighted in bold

*All release times are GMT

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