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By Kenny Fisher

The Japanese yen is stable on Thursday, as USD/JPY trades in the mid-102 range late in the European session. On the release front, Japanese Core Machinery Orders posted a gain of 8.8%, but this was well short of the estimate. In the US, Unemployment Claims met expectations, coming in at 311 thousand. There are no Japanese releases on Thursday.

In the US, retail sales data disappointed on Wednesday. Retail Sales dropped to a flat 0.0% last month, its weakest showing since January. The estimate stood at 0.2%. Core Retail Sales wasn't much better, posting a gain of 0.1%, down from 0.4% a month earlier. This was well short of the estimate of 0.4%. Retail sales are the primary gauge of consumer spending, and July's weak numbers points to a slow start to the third quarter. Although unemployment levels have dropped, this has not translated into stronger spending by the US consumer.

The Japanese economy contracted in the second quarter by 1.7%, its first decline since 2012. The yen managed to shrug off the bad news, as the markets had expected this figure. Still, negative growth does not bode well for the Japanese currency, which continues to trade above the 102 line. Analysts are pointing to the April tax hike as an important contributor to the weak GDP figure, since it has dampened consumption and hurt growth.

July proved to be a rough month for Japanese manufacturing events, as three manufacturing indicators missed their estimates. On Thursday, Core Machinery Orders bounced back from a decline with a gain of 8.8%, but this was way off the forecast of 15.5%. Earlier in the 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 weak manufacturing numbers are another indication of weakness in the Japanese economy, which could drag down the yen.

USD/JPY for Thursday, August 14, 2014

USD/JPY August 14 at 12:20 GMT

USD/JPY 102.44 H: 102.65 L: 102.32

USD/JPY Technical

S3 S2 S1 R1 R2 R3
98.84 100.00 101.19 102.53 103.07 104.17

  • USD/JPY edged higher in the Asian session but has surrendered these gains.

    • 101.19 remains a strong support level.

    • 102.53 is under strong pressure and was breached in the Asian session. 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 almost unchanged on Thursday. This is consistent with the lack of movement we're seeing from the pair. 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 Unemployment Claims. Estimate 307K. Actual 311K.
  • 12:30 US Import Prices. Estimate -0.2%.
  • 14:30 US Natural Gas Storage. Estimate 81B.
  • 17:01 US 30-year Bond Auction.

*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.

Source: USD/JPY - Steady As Japanese Manufacturing Data Misses Expectations