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Yen Consolidates Ahead of FOMC Meeting

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Yen Consolidates Ahead of FOMC Meeting

Over the course of the next year quantitative easing should continue to flood the market as tapering of bond purchases are likely put off until the middle of 2014. More bond purchases has reduced longer term yield making it difficult for the dollar to gain ground against any major currency.

The 10-year yield differential which had moved as high at 220 basis points in favor of the US dollar has declined to lightly less than 190 basis points and the trajectory of the differential is moving in favor of the yen. Recent US economic data has reflected a softening of the economy which is also a factor in the reduction in US yields.

Today Japan reported September household spending, retail sales, and unemployment. Consumption data were much stronger than expected, while unemployment was at the expected 4.0%. Japanese retail sales for September rose 3.1% from a year earlier, beating a consensus forecast for a 1.9% rise, according to a survey of analysts. Sales at large retailers were up 0.7% from a year earlier, according to the Ministry of Economy, Trade and Industry.

Japan’s unemployment rate fell last month. In a report, the Statistics Bureau said that the percentage of the total work force that is actively seeking employment during the previous month fell to 4.0%, from 4.1% in the preceding month. Analysts had expected the rate of unemployment to fall to 4.0% last month.

The USDJPY ran unto resistance near the 10-day moving average at 97.87, and a close above this level would likely lead to a test of target resistance at 99.05. Support on the currency pair is seen near the recent lows at 97.00. Momentum on the currency pair is flat with the MACD printing near the zero index level. The RSI is also reflecting consolidation printing near 48, which is in the middle of the neutral range.

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