USD/JPY

USD/JPY is trading quietly on Tuesday. The pair remains at high levels, trading just below the 103 line in Tuesday’s European session. In economic news, today’s key event is US Core CPI, with the markets expecting another weak reading from the consumer inflation indicator. Over in Japan, we’ll get a look at Trade Balance later in the day. Another trade deficit is expected for November.

The markets are keeping a close watch on the US Federal Reserve, which meets for a two-day policy meeting starting on Tuesday. The million dollar question is whether the Fed will taper QE. Although there’s a stronger likelihood that the Fed will wait until after the new year, Bernard Bernanke’s swan song could surprise the markets if the Fed does take QE action this week. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper will likely boost the US dollar against the major currencies.

Japanese releases started the week on a positive note, as the important Tankan indexes impressed. The Tankan Manufacturing Index jumped to 16 points, up from 12 points the month before. This edged above the estimate of 15 points. The news was particularly welcome, as recent Japanese manufacturing releases have not impressed. The Tankan Non-Manufacturing Index did even better, improving from 14 to 20 points, well above the estimate of 16 points. Both indicators registered their best numbers since 2007. The strong numbers could boost the struggling yen further against the dollar.

There was some good news on the fiscal front, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate next week, will remove the risk of a government shutdown and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty we’ve seen in recent months.

USD/JPY for Tuesday, December 17, 2013

USD/JPY December 17 at 12:25 GMT

USD/JPY 102.93 H: 103.11 L: 102.86

USD/JPY Technical

• USD/JPY is showing little movement in Tuesday trading. The pair briefly crossed above the 103 line during the Asian session.
• 103.30 continues to provide resistance. This is a weak line which could face pressure if the US dollar gains ground. The next resistance line is at 104.17, which has remained intact since October 2008.
• On the downside, 102.53 is providing support. This is followed by a support level at 101.19.
• Current range: 102.53 to 103.30

Further levels in both directions:

• Below: 102.53, 101.19, 100.00 and 98.92
• Above: 103.30, 104.17, 105.70, 106.85 and 107.73

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Tuesday. This is reflected in the pair, which is trading quietly. The ratio continues to be made up of a majority of long positions, reflecting a trader bias towards the dollar moving higher against the yen.

The pair continues to enjoy a quiet week, trading close to the 103 line on Tuesday. With the US releasing key inflation data later on, we could see some movement from the pair during the North American session if the inflation releases are not in line with market expectations.

USD/JPY Fundamentals

• 13:30 US Core CPI. Estimate 0.1%.
• 13:30 US CPI. Estimate 0.1%.
• 13:30 US Current Account. Estimate -101B.
• 15:00 US NAHB Housing Market Index. Estimate 55 points.
• 23:50 Japanese Trade Balance. Estimate -1.13T.

*Key releases are highlighted in bold

*All release times are GMT