USD/JPY – Slumping Yen Trading at 123

USD/JPY has posted small gains on Monday, as the pair trades at the 123 line in the North American session. The yen suffered sharp losses on Friday, following a spectacular Nonfarm Payrolls report, which has fueled speculation of a rate hike by the US Federal Reserve. In economic news, it was a quiet start to the week, with only one US event on the schedule on Monday. Labor Market Conditions Index came in at 1.6 points. In Japan, Average Cash Earnings posted a gain of 0.5%, within expectations. Later on Monday, Current Account, an important release, will be released.

US employment numbers have looked good in recent readings, but the outstanding Nonfarm Payroll report on Friday surprised the markets. The key indicator jumped to 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. The positive news continued on Monday, as the Labor Market Conditions Index gained 1.6 points in October, up from a flat reading of 0.0 points a month earlier.

Given that the Federal Reserve said in its recent policy statement that it employment data would be an important factor in a rate decision, the strong NFP reading on Friday has greatly increased the likelihood of a Fed hike. The US dollar posted broad gains as a result, and the yen closed the week above the 123 line. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand an interest rate hike before voting in favor of raising rates.

China is a key trading partner for Japan, so key Chinese economic events can have a significant effect on the movement of USD/JPY. The Chinese trade surplus rose a third straight month, hitting 393 billion yuan in October, well above the forecast of 367 billion yuan. We’ll get a look at Chinese CPI early on Tuesday, followed by Industrial Production on Wednesday.

USD/JPY Fundamentals

Monday (Nov. 9)

• 1:30 Japanese Average Cash Earnings. Estimate 0.6%. Actual 0.6%.
• 15:00 US Labor Market Conditions Index
• 23:50 Japanese Current Account. Estimate 1.50T.

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Monday, November 9, 2015

USD/JPY November 9 at 16:50 GMT

USD/JPY 123.00 H: 123.60 L: 123.00

USD/JPY Technical

• 123.74 is providing immediate resistance.
• 122.40 has switched to a support role, following strong losses by the yen late last week.
• Current range: 122.40 to 123.74

Further levels in both directions:

• Below: 122.40, 121.50, 120.40 and 118.53
• Above: 123.74, 125.63 and 126.84

OANDA’s Open Positions Ratio

USD/JPY ratio has shown slight movements towards long positions, which retain a majority (55%). This is indicative of trader bias towards the pair continuing to move to higher ground.

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.