USD/JPY – Yen Slide Continues, US Jobs Report Next

The Japanese yen continues to lose ground on Wednesday, following sharp losses a day earlier. USD/JPY is trading at 114.50 at the start of the North American session. In economic news, we’ll get a look at key US job numbers, with the release of ADP Nonfarm Payrolls. The markets are expecting a reading of 185 thousand, which would be much lower than the previous reading of 205 thousand. Thursday brings additional employment data, with the release of US Unemployment Claims. There are no Japanese releases on Wednesday.

Japanese consumers are clearly jittery about the economy, as underscored by this week’s releases. Retail Sales, the primary gauge of consumer spending, came in at -0.1%, marking a third straight decline. There was no relief from Household Spending, which posted a sharp drop of 3.1 percent, short of the forecast of a 2.5 percent decline. The indicator has now posted declines for five consecutive months. These weak figures point to a Japanese consumer who has tightened the purse strings and is cutting back on spending. At the same time, the Japanese yen enjoyed a superb February, surging over 7 percent against the US dollar. The yen has thrived despite poor domestic economic conditions, thanks to its status as a safe-haven asset which has attracted investors looking to avoid risk. However, Japanese fundamentals are unlikely to show much improvement, so the BOJ may have to step in and take further monetary action at its policy meeting later in March. At the January meeting, the BOJ adopted negative interest rates, shocking the markets and sending the yen sharply before it recovered. Any additional easing from the BoJ would likely push the yen to lower levels.

The US economy has softened in early 2016, unable to maintain the torrid pace which characterized the second half of last year. This has dampened expectations about a rate hike by the Federal Reserve in March, as Fed policymakers have stated that economic conditions will have to improve before another monetary move. Some economists have predicted that the Fed will hold off from any further hikes until 2017. Meanwhile, January reports from the US housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Home Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can affect other sectors of the economy. The US manufacturing sector has also struggled, but there was positive news last week as Core Durable Goods Orders and Durable Goods Orders were much stronger than expected in January.

USD/JPY Fundamentals

Wednesday (March 2)

• 8:15 US ADP Nonfarm Employment Change. Estimate 185K
• 10:30 US Crude Oil Inventories. Estimate 2.5M
• 14:00 US Beige Book

Upcoming Key Events

Thursday (March 3)

• 8:30 US Unemployment Claims. Estimate 271K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 49.8 points

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Wednesday, March 2, 2016

USD/JPY March 2 at 8:30 EST

Open: 113.91 Low: 113.73 High: 114.56 Close: 114.46

USD/JPY Technical

• USD/JPY showed little movement in the Asian session. The pair posted gains early in European trade and has leveled off.
• 113.86 remains busy and has switched to a support role following sharp gains by the pair on Tuesday.
• 114.65 is a weak resistance line and could break during the North American session
• Current range: 113.86 to 114.65

Further levels in both directions:

• Below: 113.86, 112.48, 111.50 and 109.87
• Above: 114.65, 115.85 and 116.65

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement, as long positions retain a strong majority (66%). This is indicative of strong trader bias towards the pair continuing to move 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.