USD/JPY trades little changed on mixed US data

The yen traded little changed against the US dollar, as lower US company employment levels were offset by higher-than-anticipated growth in the services sector. USD/JPY hit 2-1/2 month lows on Tuesday amid a slump in emerging markets.

USD/JPY hit a session low at 101.33 at 08:31 GMT, after which consolidation followed at 101.43, losing 0.02%. On February 4th, the pair touched 100.75, the weakest level since November 21st. Support was likely to be received at February 5th low, 100.80, while resistance was to be met at February 5th high, 101.69.

The US dollar was pressured after Automatic Data Processing Inc. (ADP), reported on Wednesday that the US private sector added 175 000 new jobs in January, trailing analysts’ expectations of an increase to 185 000. At the same time, new jobs added in December were downward revised to 227 000 from earlier estimates of 238 000. The ADP index is released two days before the release of the official data by the US Department of Labor. The report, due to be published on Friday, may show non-farm payrolls increased by 180 000 in January, after they rose by 74 000 in December, the weakest level since June 2012.

The company-employment “number wasn’t dramatic on either side, it really focuses the attention back on the jobs numbers,” said Chris Gaffney, co-chief investment officer at EverBank Wealth Management Inc., cited by Bloomberg. “The dollar has lost some of its safe-haven appeal. The economic numbers we’ve seen in 2014 are bringing investors back to a more realistic assessment of the economy.”

The greenback briefly pared losses yesterday, as data by the Institute for Supply Management (ISM) made it clear that corporate structures in US services sector increased their activity in January. The corresponding PMI came in at a reading of 54.0 last month, exceeding experts’ forecasts of a value of 53.7, after the index stood at 53.0 in December. Values above the key level of 50.0 are indicative for expansion in the sector.

Meanwhile, the yen continued to be pressured following a government report that revealed a record-high trade deficit.

The Japanese Ministry of Finance reported last week that the trade deficit of the nation widened to 11.5 trillion yen during the previous year, the highest on record. The Japanese trade deficit in 2013 was almost 65% higher than the previous year’s amid devaluation in the currency and energy shipments, which increased the import bill.

The yen devalued 18% against the US dollar last year, the most since 1979.

The trade data revealed that a 0.2% increase in the volume of Japan’s imports of Liquefied Natural Gas, resulted in a 18% increase in the value of imports.

A government report in January, revealed that the nation’s current account deficit widened to a record 593 billion yen in November from a deficit of 128 billion yen in the previous month. The figure was well above analysts’ expectations of a deficit of 369 billion yen. Japan usually relies less on foreign capital as the country has an annual current account surplus since 1985.

There are growing concerns that BoJ will have to increase the scale of its asset-purchasing program this year, which puts heavy pressure on the yen. Bank of Japan has been purchasing more than 7 trillion JPY (68.4 billion USD) of government bonds each month in its struggle to achieve 2% inflation in two years since April 2013.

Japan is in a process of recovery after a 15-year period of deflation.

According to Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, cited by Bloomberg: “The dollar-yen exchange rate may fall further and test support at the 100 level.” Experts refer to an area on a price graph, where clustered buy orders may be expected, as a support level.

Elsewhere, AUD/USD climbed to a daily high at 0.8980 at 0:58 GMT, also the pair’s highest point since January 14th, after which consolidation followed at 0.8966, gaining 0.62% for the day. Support was likely to be received at February 5th low, 0.8874, while resistance was to be encountered at January 14th high, 0.9054.