USD/JPY – Dollar Tops 102 After Solid Unemployment Claims

The yen tumbled on Wednesday, losing about one cent against the surging US dollar. Thursday finds the pair above the 102 line, the pair's highest levels in six months. A sharp US Unemployment Claims release helped boost the US dollar. Japanese Retail Sales beat the estimate, but this wasn't enough to stop the yen from posting sharp losses. We'll get a look at a host of Japanese indicators on Thursday, including Household Spending and Tokyo Core CPI.

In the US, Unemployment Claims continues to look show improvement, as the key indicator dropped to 316 thousand, its lowest level in two months. This figure easily beat the estimate of 331 thousand. However, the news was not as good from the manufacturing sector, as Core Durable Goods Orders posted a drop of 0.1% for the third month running. The key indicator has not posted a gain since May. Durable Goods was awful, posting a decline of 2.0%, well below the estimate of a 1.5% drop.

For a second straight week, Unemployment Claims came in lower than market expectations, and this has helped the dollar post strong gains against the retreating yen. With increasing speculation about a QE taper, employment releases will remain under the market microscope. If employment numbers continue to improve, we can expect the Fed to scale down QE early in 2014, which would likely give a big boost to the US dollar.

In Japan, Retail Sales gained 2.3% in October, a substantial drop from the gain of 3.1% a month earlier. The reading did edge past the estimate of 2.2%. Retail Sales and other consumer spending indicators will have to point upwards if the Japanese economy is to continue to improve. Meanwhile, the Bank of Japan released the minutes from the last policy meeting, and some policymakers expressed their uneasiness about inflation numbers. Although we are seeing inflation in the economy, there is concern that the Bank's 2% inflation target may not be met anytime soon. Several of the Bank's policymakers dissented with some parts of the Bank's October outlook report, and said that they see a greater downside risk to the economy. These sentiments could weigh on the yen, which continues to struggle.

USD/JPY November 28 at 11:30 GMT

USD/JPY 102.23 H: 102.24 L: 101.94

• USD/JPY has settled down on Thursday following sharp gains the day before. The pair has pushed above the 102 line, as the yen remains under strong pressure.
• The pair is facing resistance at 103.30. This is followed by a resistance line at 104.17, which has remained intact since October 2008.
• 102.53 has reverted to a support role. This line could see some pressure if the yen can reverse directions. It is followed by support at 101.19.
• Current range: 102.53 to 103.30

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Further levels in both directions:

• Below: 102.53, 101.19, 100.00, 98.92, 98.15, 97.18 and 96.00
• Above: 103.30, 104.17, 105.70 and 107.27

OANDA's Open Positions Ratio

USD/JPY ratio has reversed directions, pointing to gains in short positions on Thursday trading. This movement is not reflected in the pair's current movement, as the dollar has posted slight gains against the yen on Thursday. The ratio is close to an even split between long and short positions, which reflects a lack of trader bias as to which direction the pair might take.

The pair continues to trade at high levels, and is enjoying the view above the 102 level. With thin trading due to the holiday in the US, we can expect limited movement during the North American session.

USD/JPY Fundamentals

• 23:15 Japanese Manufacturing PMI.
• 23:30 Japanese Household Spending. Estimate 1.2%.
• 23:30 Japanese Tokyo Core CPI. Estimate 0.4%.
• 23:30 Japanese National Core CPI. Estimate 0.9%.
• 23:30 Japanese Unemployment Rate. Estimate 3.9%.
• 23:50 Japanese Preliminary Industrial Production. Estimate 2.1%.

Original post

Written By: Kenny Fisher