USD/JPY: Trading the US jobless claims Dec 2011

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The US Unemployment Claims indicator is published weekly, and measures the number of people filing for unemployment for the first time during the previous week.  A reading which is higher than the market forecast is bullish for the yen.

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

Published on Thursday at 13:30 GMT.

Indicator Background

Unemployment claims is an important economic indicator of consumer confidence in the economy. It helps measure future spending behavior, as consumers are more likely to spend if they are confident that their jobs are secure and unemployment is dropping. In turn, an increase in consumer spending sends a strong signal that the economy is healthy and growing.

Unemployment claims were down for the third straight month, garnering a great deal of media attention and strengthening the view that the US economy is at last gaining some steam. The good news for the dollar was that the previous reading was 366K, well below the figure of 389K predicted by the markets.

The market forecast for December call for an increase in unemplyment claims, with a reading of 376K. Will the indicator again beat the prediction, and continue the downward trend for a fourth straight month?

Sentiments and levels

USD/JPY failed to break out of range, despite positive data out of the US, such as a drop in unemplyment claims. Japanese indicators are a mixed bag, with manufacturing indicators down, but the service sector showing some improvement. The pair will likely continue in this holding pattern and stay within range. So, the overall sentiment is neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 0.8025, 0.7950, 0.7830, 0.7750, 0.77, 0.7675, 0.7625 and 0.7595.

5 Scenarios

  1. Within expectations: 366K to 386K: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 355K to 365K: An unexpected lower reading can send the pair well above one resistance level.
  3. Well above expectations: Below 355K: A sharp decrease in unemployment claims will push USD/JPY upwards and could break two or more resistance lines.
  4. Below expectations: 387K to 397K: A poor reading could pull the pair down, and one support level could be broken.
  5. Well below expectations: Above 397K: A sharp increase in the reading will hurt the dollar, and the pair could break two support levels.

For more on the yen, see the USD/JPY forecast.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.