USD/JPY - Yen Rally Continues Despite Strong U.S. Unemployment Claims

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

By Kenny Fisher

The Japanese yen continues to post gains on Thursday, as USD/JPY trades below the 102 line in the North American session. The yen has enjoyed an outstanding week, gaining over 200 points against the US dollar. On the release front, US Unemployment Claims dropped nicely, posting its lowest levels in almost seven years. In Japan, Preliminary Machine Tool Orders jumped in March. Later in the day, the Bank of Japan releases the minutes from its monetary policy meeting.

Unemployment Claims rebounded sharply, as the key indicator dropped to 300 thousand last week. This beat the estimate or 314 thousand and marked the lowest reading since May 2007. With the Federal Reserve looking to trim its QE program and speculation rising about a possible interest rate increase, every employment release is under the market microscope.

Wednesday's release of the Federal Reserve minutes was eagerly anticipated, but the minutes did not shed light on the question of when the Fed might raise interest rates. Policymakers expressed concern about speculation over this issue, but didn't say when the central bank might change its current monetary policy. The minutes were more dovish than expected, and the US dollar responded with losses.

The BOJ ended its policy meeting on Tuesday, and as expected, the central bank stated it was maintaining its monetary base at an annual level of 60-70 trillion yen each year. The government raised the sales tax last week, which will help reduce the country's massive debt but is likely to slow down the economy. However, BOJ Governor Haruhiko Kuroda said that there is no need to add stimulus at present, and the yen responded by continuing its rally. There is a strong likelihood that the Bank could introduce further easing in July, when the government is expected to introduce measures to stimulate the economy.

USD/JPY for Thursday, April 10, 2014

Forex Rate Graph 21/1/13

USD/JPY April 10 at 14:30 GMT

USD/JPY 101.66 H: 102.14 L: 101.42

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 101.19 102.53 103.07 104.17
Click to enlarge
  • USD/JPY has resumed its downward move on Thursday. The pair dropped to a low of 101.42 in the European session.
  • On the upside, 102.53 has some breathing room as the yen trades at higher levels.
  • 101.19 has weakened as a support level. The key line of 100.00 is stronger.
  • Current range: 101.19 to 102.53

Further levels in both directions:

  • Below: 101.19, 100.00, 99.57 and 98.97.
  • Above: 102.53, 103.30, 104.17, 105.70 and 106.85.

OANDA's Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Thursday, continuing the trend we have seen all week long. This is not consistent with the movement of the pair, as the dollar has lost ground. The ratio is made up of a strong majority of long positions, indicating trader bias towards the dollar reversing directions and moving upwards.

The yen has resumed its upward movement on Thursday. USD/JPY has edged lower early in the North American session.

USD/JPY Fundamentals

  • 6:00 Japanese Preliminary Machine Tool Orders. Actual 41.8%.
  • 12:30 US Unemployment Claims. Estimate 314K. Actual 314K.
  • 12:30 US Import Prices. Estimate 0.2%. Actual 0.6%.
  • 14:30 US Natural Gas Storage. Estimate 15B.
  • 17:01 US 30-year Bond Auction.
  • 18:00 US Federal Budget Balance. Estimate -76.5B.
  • 23:50 Japanese Monetary Policy Meeting Minutes.
  • 23:50 Japanese Corporate Goods Price Index. Estimate 1.8%.
  • 23:50 Japanese M2 Money Stock. Estimate 3.9%.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.