USD/JPY – Little Activity as BOJ Holds Course

The Japanese yen is almost unchanged on Wednesday, as USD/JPY trades in the mid-119 range. On the release front, the BOJ released its policy statement, with the BOJ saying that it would maintain its accommodative monetary stance. Later in the day, Japan releases Trade Balance. In the US, it’s a busy day, with the release of Building Permits and PPI. The highlight of the day is the Federal Reserve minutes.

There were no surprises from the BOJ policy statement, as the central bank said that it would continue to increase base money by 80 trillion yen/year. With inflation sagging and well short of the BOJ’s 2% target, the central bank has little choice but to continue its accommodative monetary stance. The divergence with the Federal Reserve, which is expected to raise rates, will likely continue to weigh on the Japanese yen, which is again flirting with the symbolic 120 level.

Japanese manufacturing data started the week on a positive note, as Revised Industrial Production gained 0.8%, bouncing back from a decline in the previous release. This was within expectations, as the estimate was 1.0%. Last week, Japanese Core Machinery Tools jumped 8.3% in December, its strongest gain since March. This easily beat the estimate of 2.4%.

The markets are keeping a close eye on the Fed minutes, which will be released later on Wednesday. With the US economy showing strong growth and positive employment numbers, there are widespread expectations for a rate hike as early as the summer. Any hints regarding a hike could provide a strong boost for the US dollar against its major rivals.

USD/JPY for Wednesday, February 18, 2015

USD/JPY February 18 at 13:05 GMT

USD/JPY 119.36 H: 119.41 L: 118.88

USD/JPY Technical

• USD/JPY has showed limited movement in the Asian and European sessions.
• 118.69 is an immediate support line. 117.49 is stronger.
• 119.83 is a weak resistance line. 120.63 is stronger.
• Current range: 118.69 to 119.83

Further levels in both directions:

• Below: 118.69, 117.49, 116.69, 115.56 and 113.83
• Above: 119.83, 120.63, 121.69 and 122.19

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Wednesday, reversing the direction seen a day earlier. This is not consistent with the pair’s movement, as the yen has posted small losses. The ratio has a majority of long positions, indicative of trader bias towards the US dollar moving to higher ground.

USD/JPY Fundamentals

• 2:49 BOJ Monetary Policy Statement.
• 6:31 BOJ Press Conference.
• 13:30 US Building Permits. Estimate 1.08M.
• 13:30 US PPI. Estimate -0.4%.
• 13:30 US Core PPI. Estimate 0.1%.
• 13:30 US Housing Starts. Estimate 1.07M.
• 14:15 US Capacity Utilization Rate. Estimate 79.9%.
• 14:15 US Industrial Production. Estimate 0.5%.
• 19:00 US FOMC Meeting Minutes.
• 21:00 US TIC Long-Term Purchases. US 41.3B.
• 22:00 US FOMC Member Jerome Powell Speaks.
• 23:50 Japanese Trade Balance. Estimate -0.60T.

*Key releases are highlighted in bold

*All release times are GMT

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