USD/JPY – Trading the US Unemployment Claims

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US Unemployment Claims, a key indicator, is released each week. It measures the number of people who filed for unemployment for the first time during the previous week. A reading which is higher than the market forecast is bearish for the dollar.

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 more jobs leads to increased consumer consumption. In turn, an increase in consumer spending sends a strong signal that the economy is healthy and growing.

After a couple of poor readings, Unemployment Claims roared back last week, with its best showing in five years. The markets are expecting an increase in claims this time around, with an estimate of 361 thousand. If the indicator can meet or beat the estimate, the dollar could receive a boost against the yen.

Sentiments and levels

 After the G-20 didn’t rap Japan over the knuckles over the plunging yen,  Japan has less motivation to curb the drop in the yen. The government’s monetary policy is not expected to change. A candidate to head the BOJ will likely be announced this week. Even if the candidate isn’t as radical as Abe wants, he is likely to comply with the government’s aggressive easing policy. With more good US figures, we could see the pair make an upward move towards the 95 level. So, the sentiment is bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 94.70, 94.40, 93.75, 92.88, 92.12 and 91.20.

5 Scenarios

  1. Within expectations: 356K to 377K: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 349K to 355K: An unexpected lower number of claims can send the pair above one resistance line.
  3. Well above expectations: Below 349K: Strong employment numbers would be bullish for the dollar. Two or more lines of resistance might be broken on such an outcome.
  4. Below expectations: 356K to 362K: A poor reading could push USD/JPY lower, and one support level could be broken.
  5. Well below expectations: Above 362K. In this scenario, the pair could break below two or more 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.