USD/JPY – Yen Edges Higher as Kuroda Talks Exit

The Japanese yen has posted gains in the Wednesday session. In North American trade, USD/JPY is trading at 106.14, down 0.41% on the day. In Japan, Core Machinery Orders rebounded with a strong gain of 8.2%, well above the forecast of 5.3%. The Bank of Japan released its minutes from the January policy meeting. In the US, key indicators were a mix. Retail Sales declined 0.1%, missing the estimate of 0.3%. On the inflation front, PPI dipped to 0.2%, but still beat the estimate of 0.1%. On Thursday, the US will publish employment claims and the Philly Fed Manufacturing Index.

The BoJ released the minutes of its January policy meeting, but the markets were more interested in what Bank of Japan Governor Haruhiko Kuroda had to say. The minutes indicated that some policymakers expressed concern about the drawbacks of the Bank’s massive monetary stimulus program, such as hurting the profits of financial institutions. However, most members were of the view that the Bank should continue its radical easing stance. Speaking after the release of the minutes, Kuroda said he was confident that the BoJ would exit its ultra accommodative monetary policy, but qualified his remarks by adding that it was too early to get into specifics, given that inflation remained well below the Bank’s target. Kuroda is playing his cards very cautiously, using the E- word (exit), while at the same time saying that it is much too early to discuss any change in policy until inflation moves closer to the target of around 2 percent.

Inflation indicators have softened in both the US and Japan. In the US, CPI dropped from 0.5% to 0.2%, and Core CPI edged lower to 0.2%, down from 0.3%. In Japan, the Producer Price Index dropped for a third straight month in February. Lower inflation could have a significant impact on monetary policy in both Japan and the US. The Bank of Japan has consistently said that it will not reduce its stimulus program until inflation moves higher, while in the US, if inflation does not move upwards, the Fed could maintain its projection of three rate hikes in 2018. If inflation does increase, there is a stronger likelihood of four rate hikes this year.

U.S Retail Sales Falls for Third Straight Month

USD/JPY Fundamentals

Tuesday (March 13)

• 19:50 Japanese Core Machinery Orders. Estimate 5.3%. Actual 8.2%
• 19:50 BoJ Monetary Policy Meeting Minutes

Wednesday (March 14)

• 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.2%
• 8:30 US PPI. Estimate 0.1%. Actual 0.2%
• 8:30 US Retail Sales. Estimate 0.3%. Actual -0.1%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.2%
• 10:00 US Business Inventories. Estimate 0.6%. Actual 0.6%
• 10:30 US Crude Oil Inventories. Estimate 2.2M. Actual 5.0M

Thursday (March 15)

• 8:30 US Empire State Manufacturing Index. Estimate 15.2
• 8:30 US Philly Fed Manufacturing Index. Estimate 23.2
• 8:30 US Unemployment Claims. Estimate 230K

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, March 14, 2018

USD/JPY March 14 at 11:50 EST

Open: 106.57 High: 106.75 Low: 106.06 Close: 106.13

USD/JPY Technical

USD/JPY showed limited movement in the Asian and European sessions. The pair has posted losses in the North American session

• 105.53 is providing support
• 106.64 is the next resistance line

Further levels in both directions:

• Below: 105.53, 104.32 and 103.09
• Above: 106.64, 107.29, 108.00 and 109.11
• Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement this week. Currently, long positions have a majority (69%), indicative of trader bias towards USD/JPY reversing directions and moving 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.