USD/JPY: Trading the US TIC Long-Term Purchases

The US TIC Long-Term Purchases release measures the level of foreign and domestic investment in the US. This important indicator is released monthly, and if the reading exceeds the market forecast, this bodes well for the US dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Published on  Tuesday at 13:00 GMT.

Indicator Background

The TIC long term purchases release is a measure of the change in net purchases of long-term securities, whereby domestic purchases are subtracted from the amount of foreign purchases. The buying of U.S. securities by non-US residents is bullish for the US dollar, since foreign currency must be converted into dollars in order to purchase U.S. securities.

Since October 2010, the indicator has failed to meet the market forecast, usually coming in   much lower than the figure forecast. October’s forecast is for 27.8B. This may be on the optimistic side, as September’s forecast was for 31.5B and came in at a very disappointing 9.5B.

Sentiments and levels

Economic fundamentals in Japan remain weak, with most indicators well below market expectations. In the present economic climate, it is difficult to see US/JPY making any dramatic moves. Thus, the overall sentiment is neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 78.50, 77.85, 77.50, 77, 76.25, 75.95 and 75.

5 Scenarios

1. Within expectations: 13B to 41B. In such a scenario, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 42B to 57B: An unexpected higher reading can send USD/JPY well above one resistance line.
3. Well above expectations: Above 57B: The chances of such a scenario are low. Such an outcome would prop up the USD/JPY, and a second resistance line might be broken as a result.
4. Below expectations: 0B to 12B: A smaller increase than forecast could cause  the pair  to drift and lose one level of support.
5. Well below expectations: Below 0B. A negative reading, which has occurred historically, would make already weak markets very jittery. In this scenario, the USD/JPY will fall and could break a second resistance level.

For more about the USD/JPY, see the USD to JPY forecast.