Forex Blog

April 24, 2014

USD/JPY – Flat Ahead of US Key Data

USD/JPY is listless in Thursday trade, as the pair continues to trade in the mid-102 range early in the North American session. On the release front, Japanese Corporate Services Price Index met expectations. We’ll get a look at the most primary gauge of Japanese inflation, Tokyo Core CPI, later in the day. In the US, there are two major events on the schedule – US Unemployment Claims and Core Durable Goods Orders.

Japan’s trade deficit ballooned in March, jumping to -1.71 trillion yen, well above the estimate of -1.27 trillion. Besides weighing on the yen, the weak figure has raised speculation that the Bank of Japan may have to step in with further easing, as the economy has softened. Consumer consumption could drop as the recent sales tax hike weighs on consumers, and the BOJ could be forced into action as early as June or July. As well, China has been experiencing a slowdown, which bodes poorly for Japanese exports.

US Existing Home Sales edged lower in March, dropping to 4.59 million, down from 4.60 million a month earlier. However, it did beat the estimate of 4.57 million, marking the first time that the indicator has beaten the forecast since August. There was also good news form the manufacturing sector, as the Richmond Manufacturing Index jumped to 7 points, crushing the estimate of 0 points.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

 

USD/JPY for Thursday, April 24, 2014

Forex Rate Graph 21/1/13

USD/JPY April 24 at 11:50 GMT

USD/JPY 102.42 H: 102.55 L: 102.25

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 101.19 102.53 103.07 104.17

 

  • USD/JPY is showing little movement in Thursday trade.
  • The pair continues to test resistance at 102.53, which has seen action all week long. Will the dollar break above this line? There is stronger resistance at 103.07.
  • 101.19 is providing strong support.
  • 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 almost unchanged in Thursday trading. This is consistent with the pair’s movement, which is showing very little movement. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar moving upwards.

It’s more of the same for the yen, as USD/JPY continues to trade in the mid-102 range. The pair is showing little change in the European session.

 

USD/JPY Fundamentals

  • 12:30 US Core Durable Goods Orders. Estimate 0.6%.
  • 12:30 US Durable Goods Orders. Estimate 2.1%.
  • 12:30 US Unemployment Claims. Estimate 309K.
  • 14:30 US Natural Gas Storage. Estimate 40B.
  • 23:30 Japanese Tokyo Core CPI. Estimate 2.8%.
  • 23:30 Japanese National Core CPI. Estimate 1.4%.

 

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.

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USD/JPY holds above 102.30 Before Tokyo CPI

The yen held its first gain in nine days versus the dollar on speculation data tomorrow will show Tokyo inflation quickened the most in more than two decades, dimming prospects the Bank of Japan will expand stimulus.

The euro remained higher after a two-day advance against its U.S. peer before a report today forecast to show a gauge of German business conditions climbed to a two-year high. U.S. figures may indicate orders for durable goods grew at a slower pace in March. New Zealand’s dollar strengthened against all its major peers after the central bank raised its benchmark rate for the second time in two months and increased its growth estimate.

“Both the BOJ and the market are paying close attention to the Tokyo CPI data, the first reading after the sales tax increase,” said Yujiro Goto, a senior currency strategist at Nomura International Plc in London. “Much higher numbers may raise expectations the BOJ will revise its inflation forecast and push back the timing of additional stimulus. The CPI data could be a trigger for yen strength.”

Bloomberg

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Japan Leads Asian Equities Lower

Asian equity markets fell on Thursday, with Japan leading the losses, as investors were disappointed with the lack of an agreement of a Trans-Pacific Partnership (TPP) deal during President Obama’s visit to Tokyo.

“The fact that we haven’t got a TPP deal ultimately does impact economic data and new sources of economic growth. We care from a long-term strategic perspective. It’s tough to draw conclusions for shorter-term investment decisions but the fact is that investment portfolios at the end of the day are long-term decisions and longer term issues like trade deals do play an impact in that,” said Manpreet Gill, senior investment strategist at Standard Chartered Bank.

A negative lead from Wall Street also dampened the mood. U.S. stocks lost ground on Wednesday as investors booked profits on the S&P 500 and a five-day winning streak on the Nasdaq. Weak data also weighed on sentiment; new home sales declined 14.5 percent in March, marking the worst sales month since July.

CNBC

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April 23, 2014

Four Experts Analyze the Impact of TPP

It is poised to be the world’s biggest ever free trade deal and possibly its most ambitious. A dozen countries are negotiating the Trans-Pacific Partnership (TPP), which if successful, will account for two-fifths of world trade.

Those countries are the US, Japan, Brunei, Malaysia, Vietnam, Singapore, Australia, New Zealand, Canada, Mexico, Chile and Peru.

But will pushing through such a pact prove too gargantuan a task? And will China continue to be left out of talks?

Four experts give their views on what’s at stake for the US, Japan, China and Vietnam.

via BBC

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April 22, 2014

USD/JPY – Slight Losses Ahead of US Housing Numbers

The Japanese yen remains at high levels, as USD/JPY continues to trade in the mid-102 range. In economic news, it’s a quiet day on the release front. Today’s key US event is Existing Home Sales, while there are no Japanese releases on Tuesday.

Japan’s trade deficit ballooned in March, jumping to -1.71 trillion yen, well above the estimate of -1.27 trillion. Besides weighing on the yen, the weak figure has raised speculation that the Bank of Japan may have to step in with further easing, as the economy has softened. Consumer consumption could drop as the recent sales tax hike weighs on consumers, and the BOJ could be forced into action as early as June or July. As well, China has been experiencing a slowdown, which is bad news for Japanese exports.

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.

The ongoing crisis in Ukraine hasn’t had much of an effect on the markets until now, but that could quickly change if the charged situation spirals out of control. Russian President Putin has threatened to act on his “right” to invade Ukraine, and has steeply raised the price that Ukraine must pay for its gas supplies. Ukrainian Prime Minister Arseniy Yatsenyuk blasted the move as ”economic aggression” and said his country must prepare for a complete cutoff of Russian gas. Meanwhile, US vice-president Joe Biden is in Kiev in a show of support for Ukraine, and the US has said it will increase sanctions if no progress is made in resolving the crisis.

 

USD/JPY for Tuesday, April 22, 2014

Forex Rate Graph 21/1/13

USD/JPY April 22 at 13:10 GMT

USD/JPY 102.50 H: 102.73 L: 102.41

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.57 100.00 101.19 102.53 103.07 104.17

 

  • USD/JPY has edged lower in Tuesday trade.
  • The pair is testing resistance at 102.53, which has seen action for the second straight day. There is stronger resistance at 103.07.
  • 101.19 is providing strong support.
  • 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 Tuesday trade. This is consistent with what we are seeing from the pair, which has edged lower. The ratio is made up of a strong majority of long positions, indicating trader bias towards the dollar moving upwards.

The yen continues to trade at high levels. USD/JPY is showing limited movement in the European session.

 

USD/JPY Fundamentals

  • 13:00 US HPI. Estimate 0.6%.
  • 14:00 US Existing Home Sales. Estimate 4.57M.
  •  14:00 US Richmond Manufacturing Index. Estimate 0 points.

 

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.

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format: HTML Text

The post USD/JPY – Slight Losses Ahead of US Housing Numbers appeared first on MarketPulse.

April 21, 2014

Market Moving Economic Events BOE Minutes and Japan Inflation

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 6:21 pm

The Easter holiday continues this week as some major markets are taking Monday off. Wednesday will bring major data releases from Australia on the inflation front. The Bank of England minutes will also be released. They will give more insight into Governor Carney’s decision to hold rates as the how the members voted on different topics. There was no surprise at the BOE announcement given that the central bank had originally mentioned that rates would remain low even as their previous unemployment target was close to being met. The target was actually hit the week after the rate decision was published.


After last months Reserve Bank of New Zealand interest hike there is further expectation of another 25 basis points raise this week. The market is not so sure about the RBNZ decision and the uncertainty is sapping some of the strength away from the Kiwi. A small rate hike could result in a negative effect as the expectation is barely met. A no rate hike announcement would be met by a strong depreciation. So it seems the RBNZ would have to create the most unlikely scenario of a higher than 25 bps hike in order to boost the NZD.


WEDNESDAY, APR 23

  • AUD Consumer Price Index
  • GBP Bank of England Minutes
  • NZD RBNZ Interest Rate Decision

Thursday, April 24 will can be quickly summed up by one word:deflation. The European Central Bank’s President Mario Draghi will issue a speech where he is expected to tackle the issue of the Eurozone’s low inflation and the measures that need to be taken to avoid a Japanese style deflation.

Japan last year launched an aggressive monetary, fiscal and political reform initiative to boost the economy out of the last two decades of deflation. The measures known collectively as the three arrows of Abenomics have had varying degrees of success. The market was impressed both by the rhetoric and the boldness of action of the Bank of Japan last year when it announced a doubling of the monetary base in two years to achieve the 2 percent inflation target. This year there has been disappointment at the lack of action by the BOJ even as the rhetoric has softened with a “wait-and-see” approach.

The inflation figures on Thursday will boost the case of Abenomics having achieve some of its objectives even as analysts and policy members criticize the unrealistic deadline. Today the Japanese trade data showed the effect of a weak currency on an Energy importing nation. The effect of “importing” inflation via energy denominated in USD has boosted the headline inflation figure, but not in a way that will trickle down to Japanese consumers already hit by the rise in the sales tax earlier in the month.


THURSDAY, APR 24

  • EUR ECB President Draghi’s Speech
  • USD Durable Goods Orders
  • JPY National Consumer Price Index

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Former BOJ Member Says Bank Will Wait Until Absolutely Necessary

The Bank of Japan is likely to hold off on expanding monetary stimulus for as long as possible but when it does act, it will take “extraordinary” steps such as buying government bonds on a massive scale, a former central bank policymaker said on Monday.

Miyako Suda, who served on the BOJ board for a decade until 2011 and helped to plot Japan’s battle against deflation, added that despite some initial success the central bank is unlikely to meet its inflation target, since it is unclear how its huge asset purchases would lead to higher inflation expectations.

“The BOJ will probably maintain its bullish price forecast for as long as possible and keep policy unchanged until it becomes absolutely impossible to continue arguing that its price target can be met,” Suda told Reuters in an interview.

“But once he feels something must be done, I think Governor (Haruhiko) Kuroda will do something quite extraordinary because small steps won’t work,” said Suda, who is now special adviser at the Canon Institute for Global Studies, a private think tank.

The BOJ has stood pat on monetary policy since deploying an intense burst of stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate consumer inflation to 2 percent in roughly two years.

Kuroda has repeatedly said Japan is on track to meet the price target as consumer inflation, which hit 1.3 percent in February, will accelerate due to improvements in the economy. But markets are unconvinced that inflation will accelerate much from here and are betting on another stimulus around July.

via Reuters

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Japan Trade Deficit Balloons Due to Energy Imports

Japan’s trade deficit quadrupled in March as export growth slowed and energy imports continued to rise.

A weak Japanese currency, which pushed up the cost of imports, also contributed to the widening gap.

The deficit rose to 1.45 trillion yen ($14bn; £8.4bn), up from 356.9bn yen during the same month a year ago.

Japan’s energy imports have been rising after it shut all its nuclear reactors in the aftermath of the earthquake and tsunami in 2011.

According to the latest trade data, imports of Liquefied Petroleum Gas (LPG) rose more than 8% in March, compared to the same month last year. Meanwhile, imports of Liquefied Natural Gas (LNG) rose nearly 4%.

And Japan is having to pay more for those imports after a series of aggressive policy moves aimed at spurring economic growth – including a huge boost to the country’s money supply – have weakened the yen sharply.

The Japanese currency fell nearly 10% against the US dollar between March 2013 and March this year.

The latest figures show that while LPG imports rose 8.1% in volume during March, the value of those imports rose more than 18%.

Similarly, the volume of LNG imports rose nearly 4%, while the value of those shipments jumped 14%.

via BBC

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Geopolitical Concerns On Alert During Easter

The confrontation in Ukraine continues to keep investors on edge over this long European holiday weekend. The situation remains precarious despite the unexpected four-party agreement in Geneva last week and even during the temporary suspension of the “anti-terrorist” campaign in observance of the Easter holidays. The “he said/she said” activity is quickly exhausting the west’s Russian sanctions stand – it seems a more diplomatic approach with Russia is now required. Therefor it’s no real surprise that forex ranges have been tight, volatility kept to a minimum and liquidity thin while watching and waiting for any positive developments on the geopolitical front.

The dollar majors have largely remained in a narrow holiday range with USD/JPY the most notable mover, rising to a 2-week high above ¥102.60 after a wider than expected trade deficit in Japan. The Kiwi did manage to spike above $0.86 in the early Asia going but has since reversed all of those gains, while the AUD happened to match its Friday highs of $0.9340 before retreating and treading water ahead of the North American session. Last weeks CFTC positioning data report happens to show that the net longs in both the AUD and NZD currencies have hit a 11-month high.

Japan’s bigger than expected rise in its March trade deficit, where imports have surged and exports remain subdued, has encouraged some further yen selling. It seems that investors are somewhat happy to treat the latest disappointment in the Japanese trade balance as reason enough for more speculation over the Bank of Japan turning less neutral in favor of more easing. It’s also worth noting that the BOJ’s policy statement at the end of this month (April 30th) will also feature the release of semi-annual outlook on price and the economy. Japan’s March trade deficit of $14B was four times higher than last years print. Exports showed a negligible rise of +1.8% y/y – well below the +6.5% consensus – while imports spiked by +18.1% y/y mostly due to another double-digit rise in shipments of crude oil.

What’s is the BoJ to do? Will they be proactive and provide further QE or should they be relying on price fundamentals headlines for direction? Japan trusting inflation prints can give a distorted view of what currently happening. This Friday’s Japanese inflation data is likely to show above target inflationary pressure, somewhat masking the BoJ’s policy agenda as being successful. Both Tokyo’s and Nationwide CPI are released together, and the market expects a 2.8% y/y inflation print in the Tokyo region – a reading well above the BoJ’s +2% target. This higher reading does “not” equate to the BoJ’s mission as being completed. Analysts note that the implementation of the sales tax hike on April 1st will have somewhat artificially boosted Japan’s inflation headline prints (companies passing on the sales tax hike to customers). The BoJ has already recognized this and will adjust April’s inflation print downward by -1.7% to reflect a truer picture of inflationary pressures in the region. The BoJ’s aim is to generate “sustainable” inflation. Governor Kuroda’s problem to date is that the uptick in Japan’s inflationary pressures has been mostly due to yen weakness and with no “fresh” weakness for months the price of the CPI basket can only be expected to stall.

The Easter Monday holiday in Europe is expected to keep North American participation at a minimum.

Forex heatmap

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Forex Market Going Through The Motions

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April 17, 2014

BOJ Still Optimistic About Regional Economies Says Sales Tax Effect Will Not Last

The Bank of Japan maintained its upbeat view on most of the country’s regional economies, adding to reassurances from its governor that the world’s third-largest economy can ride out the pain from a sales tax hike without additional stimulus.

Also on Thursday, a Reuters survey showed manufacturers were more confident about business conditions in April and saw a more moderate dip over the next three months, suggesting the damage from the tax hike may be less pronounced than thought.

The optimism may add to a growing consensus in financial markets that the central bank will hold off on easing policy until around July to spend more time scrutinizing the impact from the April 1 tax hike on domestic consumption.

In a quarterly report analyzing nine regional sectors of Japan, the BOJ raised its assessment for one and left unchanged its view for the rest to say they are all recovering moderately. None of the regional assessments were revised down.

“Domestic demand has been firm, production has been rising moderately as a trend, while job markets and income conditions have been improving,” according to the report compiled at a meeting of the central bank’s regional branch managers.

via Reuters

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