USD/JPY - Slight Gains As Japanese GDP Slides

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

By Kenny Fisher

The Japanese yen has posted slight losses on Wednesday, as USD/JPY continues to move upwards. In the European session, the pair is trading in the mid-102 range. In economic news, Japanese GDP dropped 1.7% in Q2, matching expectations. In the US, today's highlights are Core Retail Sales and Retail Sales. The markets are not expecting any change in the upcoming releases. In Japan, today's sole release is Core Machinery Orders.

The Japanese economy contracted in the second quarter by 1.7%, its first decline since 2012. The yen has not taken much of a hit as result, as the reading matched the market estimate. The April tax hike is an important contributor to the weak GDP figure, since it has dampened consumption and hurt growth.

Is the Japanese manufacturing sector in trouble? Japanese manufacturing indicators continue to post declines this week. Tertiary Industry Activity came in at -0.1%, short of the estimate of a 0.2% gain. Revised Industrial Production dropped 3.4% last month, its steepest fall since October 2012. The markets are hoping for some relief from Core Machinery Orders later in the day, with a strong gain expected in the July release.

In the US, employment indicators are under the market microscope, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate hike is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a rate move. There was positive news on Tuesday, as JOLTS Job Openings continued to improve and climbed to a 13-year high. We'll get a look at Unemployment Claims on Thursday.

USD/JPY for Wednesday, August 13, 2014

USD/JPY August 13 at 12:40 GMT

USD/JPY 102.31 H: 102.51 L: 102.22

USD/JPY Technical

S3 S2 S1 R1 R2 R3
98.84 100.00 101.19 102.53 103.07 104.17
Click to enlarge
  • USD/JPY was flat in the Asian session. The pair edged higher in European trade, but then retracted.
  • 101.19 remains a strong support level.
  • 102.53 is under strong pressure and could break during the day. 103.07 is stronger.
  • Current range: 101.19 to 102.53

Further levels in both directions:

  • Below: 101.19, 100, 98.84 and 98.09
  • Above: 102.53, 103.07, 104.17 and 105.44

OANDA's Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Wednesday, continuing the direction seen a day earlier. This is not consistent with the pair's movement, as the yen has posted slight losses. The ratio continues to have a majority of long positions, indicating trader bias towards the dollar strengthening at the yen's expense.

USD/JPY Fundamentals

  • 12:30 US Core Retail Sales. Estimate 0.4%.
  • 12:30 US Retail Sales. Estimate 0.2%.
  • 13:05 FOMC Member William Dudley Speaks.
  • 14:00 US Business Inventories. Estimate 0.4%.
  • 14:30 US Crude Oil Inventories. Estimate -0.8M.
  • 17:01 US 10-year Bond Auction.

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