USD/JPY – Yen Subdued, US Durables, Jobless Claims Next

The Japanese yen continues to have a quiet week, as USD/JPY trades at 112.30 in the European session. In economic news, Japan will release Tokyo Core CPI, with the estimate standing at 0.0%. Later in the day, the US releases two key events – Core Durable Goods Orders and Unemployment Claims. Core Durable Goods Orders is expected to improve to 0.2%, while Unemployment Claims is forecast to jump up to 271 thousand.

The yen continues to radiate strength against the US dollar. The currency has enjoyed a spectacular month of February, surging 8 percent against the greenback. Japanese fundamentals have not impressed, as GDP contracted in the fourth quarter, Japanese consumer spending has fallen off, hurting growth and deflation remains a serious concern. We’ll get a close look at the inflation picture later on Thursday, as Japan releases CPI reports. The markets have low expectations, as Tokyo Core CPI, a key indicator, is expected to come in at a flat 0.0%.

Despite the limping Japanese economy, the yen has taken full advantage of its traditional safe-haven status, as global financial turmoil has caused investors to flee risk and snap up safe assets like the yen. At the same time, soft fundamentals are likely to continue, and the BOJ may have to take further monetary action at its next policy meeting in March. At the January policy meeting, the BOJ adopted negative interest rates, shocking the markets and sending the yen sharply lower before the currency rebounded. If the BoJ does take action, this would likely push the high-flying yen to lower levels.

US fundamentals have softened in the early part of 2016, and the American consumer has become less optimistic about the economy as a result. This was underscored by CB Consumer Confidence, which slid to 92.2 points in February, well off the forecast of 97.4 points. This marked a three-month low for the key indicator. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. Meanwhile, the US manufacturing sector continues to struggle. Recent manufacturing reports have pointed to contraction in the sector, and this was again the case with the Richmond Manufacturing report, which slipped to -4 points in February, short of the forecast of +2 points. This was the indicator’s worst reading since September 2015. On Thursday, the US releases Core Durable Goods Orders, a key manufacturing indicator. The indicator has posted two straight declines, and the estimate for the January report stands at 0.2%. A soft reading could send USD/JPY to lower levels.

USD/JPY Fundamentals

Thursday (Feb. 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 271K
• 8:30 US Durable Goods Orders. Estimate 3.0%
• 9:00 US HPI. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate -125B
• 18:30 Japanese Tokyo Core CPI. Estimate 0.0%
• 18:30 Japanese National Core CPI. Estimate -0.2%

Upcoming Key Events

• Friday (Feb. 26)
• 8:30 US Preliminary GDP. Estimate 0.4%

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Thursday, February 25, 2016

USD/JPY February 25 at 6:45 EST

Open: 112.05 Low: 111.96 High: 112.62 Close: 112.34

USD/JPY Technical

• USD/JPY posted gains in the Asian session has retracted in European trade
• 111.50 is providing support
• 112.48 is a weak resistance line
• Current range: 111.50 to 112.48

Further levels in both directions:

• Below: 111.50, 109.87 and 108.58
• Above: 112.48, 113.86, and 114.65

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged, consistent with the lack of movement from USD/JPY. Long positions retain a strong majority (65%), which is indicative of strong trader bias towards the pair breaking out and moving 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.