USD/JPY – Yen Dips as Fed Hints at March Rate Hike

USD/JPY continues its upward move this week, as the pair has posted gains in the Wednesday session. Currently, USD/JPY is trading at 113.70. Earlier in the session, the pair hit its highest level since February 16. In Japan, Capital Spending posted a 3-month gain, at 3.8%. Final Manufacturing PMI improved to 53.3, shy of the forecast of 53.6 points. In the US, today’s highlight is the ISM Manufacturing PMI. On Thursday, Japan releases Household Spending and inflation indicators, led by Tokyo Core CPI. The US will publish the weekly unemployment claims report.

There was plenty of anticipation in the air ahead of President Trump’s speech to Congress. In the end, however, the speech was short on specifics and the markets haven’t shown much reaction in the Wednesday session. Trump promised “massive” tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, “financed through both public and private capital”. Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.

With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could continue to rally against the yen. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.

USD Surges as Markets Back March Fed Rate Hike

Trump Blows Trumpet But Is Light On Detail (Again)

USD/JPY Fundamentals

Tuesday (February 28)

• 18:50 Japanese Capital Spending. Estimate 0.6%. Actual 3.8%
• 19:30 Japanese Final Manufacturing PMI. Estimate 53.6. Actual 53.3

Wednesday (March 1)

• 8:30 US Core PCE Price Index. Estimate 0.3%
• 8:30 US Personal Spending. Estimate 0.3%
• 8:30 US Personal Income. Estimate 0.3%
• 9:45 US Final Manufacturing PMI. Estimate 54.4
• 10:00 US ISM Manufacturing PMI. Estimate 56.2
• 10:00 US Construction Spending. Estimate 0.7%
• 10:00 US ISM Manufacturing Prices. Estimate 68.5
• 10:30 US Crude Oil Inventories. Estimate 1.5M
• All Day – US Total Vehicle Sales. Estimate 17.7M
• 13:00 US FOMC Member Robert Kaplan Speech
• 14:00 US Beige Book
• 18:00 US FOMC Member Lael Brainard Speech
• 18:50 Japanese Monetary Base. Estimate 23.2%
• 22:45 Japanese 10-y Bond Auction

Upcoming Key Events

Thursday (March 2)

• 8:30 US Unemployment Claims. Estimate 243K
• 18:30 Japanese Household Spending. Estimate -0.3%
• 18:30 Tokyo Core CPI. Estimate 0.2%

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, March 1, 2017

USD/JPY March 1 at 6:50 EST

Open: 113.09 High: 113.83 Low: 112.75 Close: 113.78

USD/JPY Technical

USD/JPY has posted slight gains in the Asian and European sessions

• 112.57 is providing support
• 113.80 is a weak resistance line
• Current range: 112.57 to 113.80

Further levels in both directions:

• Below: 112.57, 110.94, 109.77 and 109.18
•  Above: 113.80, 114.83 and 115.90

OANDA’s Open Positions Ratio

USD/JPY ratio continues to post gains in short positions this week. Currently, long positions have a majority (57%), indicative of trader bias towards USD/JPY continuing to move upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.