Yen Steady, Shrugs Off Soft Manufacturing Report

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Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Japanese yen has posted slight gains on Thursday, continuing the upward movement which marked the Tuesday session. USD/JPY is trading at 106.50. On the release front, Japanese Core Machinery Orders posted a sharp decline of 11.0%, well below expectations. Preliminary Machine Tool Orders also recorded a sharp drop, posting a 25% decline. In the US, today’s major event is Unemployment Claims. The markets are not expecting much change from the previous release, with an estimate of 269 thousand. On Friday, the US will release UoM Consumer Sentiment, with the indicator expected to dip to 94.1 points.

Japanese manufacturing data was dismal on Wednesday. Core Machinery Orders declined 11.0%, compared to a forecast of a 3.2% decline. This marked the second decline in three months. There was no relief from Preliminary Machine Tool Orders, which continues to post sharp declines. The indicator declined 25.0 in the May report. Earlier in the week, Final GDP posted a respectable gain of 0.5% in the first quarter, edging above the initial government report of a 0.4% for Q1. The GDP release is certainly good news for the government, which recently had an about-face and postponed a sales tax hike from April 2017 to October 2019. This delay is intended to help struggling households and rejuvenate sluggish consumer spending, a key component of economic activity. Still, the economy is on shaky ground, as global demand remains soft and a strong yen could hamper the struggling export sector.

After several soft employment numbers, there was growing unease about the strength of the US labor market. On Friday, Nonfarm Payrolls plunged to a paltry 38 thousand, shocking the markets and sending the US dollar tumbling. On Monday, the Labor Market Conditions Index dropped 4.9 points, marking a fourth consecutive decline. This was followed by Revised Nonfarm Productivity, which dropped 0.6%. The markets were braced for a weaker reading from JOLTS Job Openings on Wednesday, but the indicator improved to 5.79 million, easily beating the forecast of 5.67 million. We’ll get a look at Unemployment Claims on Thursday, with the estimate standing at 269 thousand, little changed from the previous reading.

USD/JPY Fundamentals

Wednesday (June 8)

  • 19:50 Japanese Core Machinery Orders. Estimate -3.2%. Actual -11.0%
  • 19:50 Japanese M2 Money Stock. Estimate 3.3%. Actual 3.4%

Thursday (June 9)

  • 1:58 Japanese Preliminary Machine Tool Orders. Actual -25.0%
  • 8:30 US Unemployment Claims. Estimate 269K
  • 10:00 US Wholesale Inventories. Estimate 0.1%
  • 10:30 US Natural Gas Storage. Estimate 80B
  • 13:01 30-year Bond Auction
  • 19:50 Japanese PPI. Estimate -4.2%

Upcoming Key Events

Friday (June 10)

  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 94.1 points

*Key events are in bold

*All release times are EDT

USD/JPY for Thursday, June 9, 2016

USD/JPY June 9 at 6:40 EDT

Open: 106.77 Low: 106.23 High: 106.87 Close: 106.45

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.73 104.99 105.87 107.16 108.37 109.87
Click to enlarge
  • USD/JPY has recorded small losses in the Asian and European sessions
  • There is resistance at 107.16
  • 105.87 is providing support
  • Current range: 105.87 to 107.16

Further levels in both directions:

  • Below: 105.87, 104.99, 103.73
  • Above: 107.16, 108.37, 109.87 and 110.66

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing movement towards long positions on Thursday. Long positions have a strong majority (67%), indicative of trader bias towards USD/JPY reversing directions and moving to higher ground.

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.