USD/JPY – Dollar Climbs Close to 114 on Strong Jobless Claims

The Japanese yen is almost unchanged in the Friday session. Currently, USD/JPY is trading at 113.60. On the release front, Japanese numbers were a mix. The PPI inflation indicator posted a gain of 0.5%, beating the estimate of 0.0%. However, Tertiary Industry Activity disappointed with a decline of 0.4%, shy of the forecast of -0.1%. In the US, today’s highlight is Preliminary UoM Consumer Sentiment, with the markets expecting a strong reading of 97.9 points.

US unemployment claims looked very sharp on Thursday, dropping to 235 thousand, well below the estimate of 249 thousand. The dollar responded with strong gains, as USD/JPY climbed 1.3 percent. On Friday, Japanese Prime Minister Shinzo Abe will be in Washington to hold talks with President Trump. The meeting comes at an important time, as both sides hope to smooth some ruffled feathers. One of Trump’s first moves in office was to withdraw the US from the Trans-Pacific Partnership, a trade deal which Japan has strongly endorsed. Trump recently accused Japan of unfair trade practices in its ultra-loose monetary policy, which has kept the yen at low levels and helped boost Japanese exports. The Japanese have argued that they are not targeting the yen’s value, but rather trying to combat deflation. Still, Abe will have his work cut out for in trying to assuage Trump, who has shown little patience with US trading partners and has repeatedly made protectionist statements. Japan is heavily reliant on its export sector, and the last thing it needs is a trade war with the United States. Abe is expected to defuse the currency spat by suggesting that the US and Japan discuss currency policy at the next G7 meeting.

Abe Hoping to Move Conversation Away From Monetary Policy

Donald Trump didn’t field much of an economic platform during the election campaign, but he did promise a significant fiscal boost through infrastructure spending and tax cuts. This led to a post-election euphoria in the markets and boosted the US dollar. Fast forward to February, and optimism has been replaced by caution and unease, as Trump continues to entangle himself in controversy, both with US trading partners and at home, with the media and Supreme Court. On Thursday, Trump said that the administration was working on a “phenomenal” tax plan, which would be released in a few weeks, although he gave no details. Trump’s plan is expected to lower taxes for both corporations and individuals, although tax reform promises to be a slow and daunting task, as changes to the US tax code can only be made by Congress. Still, the markets are hungry for any movement in this direction, and the dollar could get a strong boost once Trump outlines his tax agenda.

USD/JPY Fundamentals

Thursday (February 9)

• 18:50 Japanese PPI. Estimate 0.0%. Actual 0.5%
• 23:30 Japanese Tertiary Industry Activity. Estimate -0.1%. Actual -0.4%

Friday (February 10)

• 8:30 US Import Prices. Estimate 0.4%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.9
• 10:00 US Preliminary UoM Inflation Expectations
• 14:00 US Federal Budget Balance

*All release times are GMT

*Key events are in bold

USD/JPY for Friday, February 10, 2017

USD/JPY February 10 at 6:05 EST

Open: 113.40 High: 113.85 Low: 113.38 Close: 113.59

USD/JPY Technical

USD/JPY has shown little movement 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, 109.85 and 108.61
•  Above: 113.80, 114.83 and 115.90

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Friday session. Currently, long positions have a majority (53%), indicative of trader bias towards USD/JPY continuing to climb higher.

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.