By Kenny Fisher
The Japanese yen is not showing movement on Friday, as USD/JPY continues to trade in the mid-102 range. In economic news, Japanese Tertiary Industry Activity slipped in March, posting its sharpest decline in almost a year. There are no Japanese or US releases on the Good Friday holiday.
US releases ended the week on a high note, as employment and manufacturing numbers were strong. The all-important Unemployment Claims was up slightly to 304 thousand, but had no trouble beating the estimate of 316 thousand. With the Federal Reserve planning another trim to its QE program at the end of the month and speculation rising about a possible interest rate increase next year, every employment release is under the market microscope. Meanwhile, the Philly Fed Manufacturing Index soared to 16.6 points, its best showing since September. This was well above the estimate of 9.6 points.
Thursday’s Japanese releases did not impress the markets, but nonetheless the yen managed to hold its own against the strong US dollar. Revised Industrial Production plunged by 2.3%, its worst showing since July. Consumer Confidence continues to lose ground, with the March reading dropping to 37.5 points. Finally, Tertiary Industry Activity, an important manufacturing indicator, disappointed with a drop of 1.0%, well below the estimate of 0.2%, and its weakest showing since last April. With the Japanese economy still recovering slowly, the BOJ is unlikely to trim its current stimulus program.
Comments by Federal Reserve chair Janet Yellen on Wednesday continue to weigh on the US dollar. Yellen said there is little inflationary pressure on the economy, and it was unlikely that the Fed’s inflation target of 2% would be met. She added that although the economy has showed signs of recovery, unemployment remains a sore spot. The Fed has abandoned its promise to maintain interest rates at least as long as the unemployment rate is above 6.5%, but the dovish stance we are seeing from Yellen means that a rate hike is unlikely in the near future.
The crisis in the Ukraine continues to simmer, as Russian President Vladimir Putin threatened to act his “right” to attack Ukraine. There have been several skirmishes between pro-Russian militiamen and Ukrainian forces, and casualties have been reported on both sides. Secretary of State John Kerry and his Russian counterpart met on Thursday, but a quick resolution is unlikely. Western Europe is dependent on Russian oil and gas, so we can expect the markets to react if the crisis intensifies.
USD/JPY for Friday, April 18, 2014
USD/JPY April 18 at 10:15 GMT
USD/JPY 102.42 H: 102.57 L: 102.37
- USD/JPY is unchanged in thin trading on Friday.
- 102.53 continues to provide resistance, but has weakened due to significant gains by US/JPY this week. It could be tested if the dollar shows any upward movement. There is stronger resistance at 103.07.
- 101.19 is a strong support level.
- 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 by short positions in Friday trade. This is not consistent with what we are seeing from the yen, which is showing very little activity. The ratio is made up of a strong majority of long positions, indicating trader bias towards the dollar moving upwards.
The yen is listless on Friday. With US markets closed for a holiday, we can expect more of the same from USD/JPY as we wrap up the week.
- There are no US or Japanese releases on Friday.