USD/JPY - Dips Below 102 On Fed Statement

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

By Kenny Fisher

The Japanese yen has taken advantage of broad dollar weakness following the Federal Reserve policy statement on Wednesday. Late in the European session, the pair is trading below the 102 level. On the release front, there are two key events in the US - Unemployment Claims and the Philly Fed Manufacturing Index. In Japan, All Industries Activity slumped in May, posting its sharpest decline in three years. Early on Friday, BOJ Governor Haruhiko Kuroda will speak at an event in Tokyo.

There were no surprises from the BOJ minutes, which showed that the BOJ planned to continue expansion of the monetary base at its current level of JPY 60-70 trillion per year. This follows remarks from BOJ Governor Haruhiko Kuroda last week, who noted that the easing measures have led to the economy moving in the right direction. However, the monetary moves have hurt the yen, which continues to trade at very high levels against the dollar, and this trend is likely to continue.

The Federal Reserve continued to trim its QE program, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won't see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as "steady as she goes".

The news out of the US was mixed on Tuesday. Building Permits dropped to 0.99M, well below the estimate of 1.07M. On the inflation front, CPI moved up modestly, posting a gain of 0.3%. This was the strongest gain we've seen since January 2013. CPI followed suit, climbing to an eleven-month high. The index rose to 0.4%, beating the estimate of 0.2%. The Fed policy statement took note of the weak inflation levels, which are nowhere near the Fed's target of 2%.

USD/JPY for Thursday, June 19, 2014

USD/JPY June 19 at 12:30 GMT

USD/JPY 101.86 H: 102.00 L: 101.74

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 edged lower on Thursday.
  • On the upside, 102.53 has some breathing room as the yen trades under the 102 level. This followed by resistance at 103.07, which has held firm since early April.
  • 101.19 is providing support, protecting the key 100 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, 103.07, 104.17 and 105.70

OANDA's Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions in Thursday trade. This is not consistent with the movement of the pair, as the yen has edged lower. The ratio continues to be made up of a majority of long positions, indicating trader bias towards the dollar reversing directions and moving higher.

USD/JPY has dropped below the 102 line. The pair has edged higher in the European session.

USD/JPY Fundamentals

  • 4:30 Japanese All Industries Activity. Estimate -3.7%. Actual -4.3%.
  • 12:30 US Unemployment Claims. Estimate 316K.
  • 14:00 US Philly Fed Manufacturing Index. Estimate 14.3 points.
  • 14:00 US CB Leading Index. Estimate 0.6%.
  • 14:30 US Natural Gas Storage. Estimate 112B.

*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.