Yesterday’s trade saw USD/JPY within the range of 118.04-119.64. The daily low has been the lowest level since December 17th. The pair closed at 118.41, losing 1.03% on a daily basis.
At 8:13 GMT today USD/JPY was up 0.56% for the day to trade at 119.11. The pair touched a daily high at 119.25 at 7:30 GMT.
Fundamentals
United States
Change in employment
Employers in the US non-farm private sector probably added 225 000 new jobs during December, according to the median estimate by experts, following 208 000 new positions added in November. The latter has been the lowest gain in jobs since August, when 202 000 jobs were added. The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs is considered of utmost importance for consumer spending, while the latter is a major driving force behind economic growth. In case expectations were exceeded, this would bolster demand for the dollar. The official figure is due to be published at 13:15 GMT.
Balance of trade
The deficit on US balance of trade probably narrowed to USD 42.0 billion during November from a trade gap of USD 43.4 billion, registered in October. If so, this would be the smallest shortfall since August, when a deficit of USD 39.99 billion was reported. In October total exports expanded 1.2% to reach USD 197.5 billion, supported by record sales of capital goods as customers abroad purchased more American-made aircraft, generators and industrial equipment. Total imports surged 0.9% to USD 241 billion, due to the highest shipments of capital goods, foods, feeds and beverages ever recorded. Demand for foreign automobiles and parts also contributed to this increase.
The trade balance, as an indicator, measures the difference in value between the country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form the Gross Domestic Product. Generally, exports are linked to economic growth, while imports indicate how strong domestic demand is. In case the trade balance deficit shrank more than anticipated, this would increase demand for the greenback. The Bureau of Economic Analysis will release the official trade data at 13:30 GMT.
FOMC Minutes
At 19:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on December 16th-17th. The minutes offer detailed insights on FOMC’s monetary policy stance. This release is closely examined by traders, as it may provide clues over interest rate decisions in the future. High volatility is usually present after the publication.
The Committee pledged to maintain borrowing costs close to zero for a considerable period of time, while also indicating that it was moving towards a rate hike at sometime this year. According to Federal Reserves most recent press release: ”Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committees 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committees employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.”
Yen performance
The Japanese currency lost ground against the US dollar, as safe haven demand seemed to have decreased. Futures on the Standard & Poor’s 500 Index due to expire in March climbed 0.3%.
“Equity declines have moderated in Tokyo trading,” said Kumiko Ishikawa, a currency analyst at Gaitame.com Research Institute Ltd., cited by Bloomberg. “While the drop in stocks and oil could be seen as a bit overdone, there’s still a strong sense of risk aversion in the market. The yen is weakening now, but I don’t expect it will suddenly drop back to 120 per dollar.”
The yen has appreciated 2.7% so far this year, marking the best performance among 10 developed-nation currencies, which are tracked by Bloomberg Correlation-Weighted Indexes.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 118.70. In case USD/JPY manages to breach the first resistance level at 119.35, it will probably continue up to test 120.30. In case the second key resistance is broken, the pair will probably attempt to advance to 120.95.
If USD/JPY manages to breach the first key support at 117.75, it will probably continue to slide and test 117.10. With this second key support broken, the movement to the downside will probably continue to 116.15.
The mid-Pivot levels for today are as follows: M1 – 116.63, M2 – 117.43, M3 – 118.23, M4 – 119.03, M5 – 119.83, M6 – 120.63.
In weekly terms, the central pivot point is at 120.03. The three key resistance levels are as follows: R1 – 121.22, R2 – 121.94, R3 – 123.13. The three key support levels are: S1 – 119.31, S2 – 118.12, S3 – 117.40.
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