Can USD/JPY Retake 100.00?

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Market Drivers for June 28, 2013
USD/JPY takes out 99.00 as Japanese data supports
Euro steady at 1.3050
Nikkei 3.51% Europe -0.13%
Oil $97/bbl
Gold $1201/oz.

Europe and Asia:
JPY Nomura/JMMA Manufacturing PMI
JPY Jobless Rate 4.1% vs. 4.0%
JPY National CPI 0.0% vs. 0.0%
JPY Retail Trade 0.8% vs. 0.0%
JPY Household Spending -1.6% vs. 1.4%
JPY Industrial Production -1.0% vs. -2.4%
CHF KOF Swiss Leading Indicator 1.18 vs. 1.19
EUR German Retail Sales 0.8% vs. 0.2%

North America:
USD Chicago Purchasing Manager 9:45
USD U. of Michigan Confidence 9:55
CAD GDP 8:30

The last trading day of the half year saw USD/JPY take out the 99.00 figure in late Asian and early European trade as 3.5% jump in the Nikkei and fixing demand for new toshin funds helped buoy the pair.

USD/JPY rose steadily through Asian session trade helped by a strong rally in the Nikkei. The move occurred despite the rather mixed economic data out of the region. The latest releases showed that unemployment ticked up to 4.1% from 4.0% eyed, household spending contracted sharply to -1.6% versus 1.4% and inflation saw little pick up with National CPI at 0.0% versus 0.0%.

There were however some bright spots as Retail Trade increased markedly to 0.8% from 0.2% forecast and Industrial Production improved as well. Overall the market took heart from the gradual improvement in activity in the corporate sector reasoning that an increase in profits will eventually translate into broader consumer demand.

However, the primary reason for USD/JPY recovery this week has more to do with US data rather than any events across the Pacific. As the week progressed US data has produced consistent upside surprises, calming equity markets and convincing investors that US growth remains on track.

Next week is likely to prove pivotal for the pair as markets will get a slew of key economic data including ISM Manufacturing and Services as well as the all important NFP report on Friday. If the news out of US continues to prove positive USD/JPY could retake the key 100.00 barrier as market jitters that dogged pair through most of June will begin to disappear.

Elsewhere today, the price action was generally muted with EUR/USD steady at 1.3050 as German Retail Sales showed a bit of rise on a month over month basis confirming the steady growth in Europe largest and most important economy.

Today’s North American session has little in terms of event risk with just the revisions to U of M and the Chicago PMI data on tap. If the Chicago PMI beats the forecast traders may take it as a proxy for the broader ISM Manufacturing report next week and could push USD/JPY towards the 99.50 level as the day progresses.

Boris Schlossberg
Managing Director

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