USD/JPY – Yen Ticks Lower Ahead of BoJ Statement

The Japanese yen has posted slight losses on Thursday, as USD/JPY is currently trading at 104.70. On the release front, the US will release Unemployment Claims, with the indicator expected to rise to 261 thousand. Japan will release Retail Sales and Tokyo Core CPI, both key indicators. This will be followed by the highly-anticipated BoJ policy statement. On Friday, the US will release Advance GDP, with the markets expecting a banner reading of 2.6%. We’ll also get a look at UoM Consumer Sentiment, which is expected to drop to 90.3 points.

With the BoJ issuing a policy statement on Thursday, the bank’s monetary stance still remains unclear. Will it adopt further easing? There is strong pressure on the hesitant BoJ to take action, as the Japanese economy is struggling with weak growth and deflation. The bank has rejected using helicopter money, leaving a cut in rates or an expansion of qualitative or quantitative easing. Any one of these moves could push the yen to lower levels.  Meanwhile, the Abe government is planning a significant fiscal spending package, but how big is big? On Wednesday, Abe announced a spending package of JPY 28 trillion, higher than the markets had expected. This report sent the yen lower. We can expect further volatility from USD/JPY as additional details about the spending package are released. 

There were no dramatic moves by the Federal Reserve, which concluded its policy meeting on Wednesday. The bank continued to hold the course on interest rates, maintaining levels at 0.25% in a 9-1 vote. The Fed statement sounded upbeat, saying that risks to the economy have receded and the employment market is getting tighter. The Fed added that it continues to monitor inflation levels and noted that the housing sector had improved. Will the Fed make a move and raise rates in September? It appears that the Fed could go either way, and policymakers will make a decision at the September meeting based on the strength of US data. This means that key US numbers, such as Friday’s Advance GDP report, will be under the market microscope, and unexpected readings could lead to strong volatility in the currency markets.

USD/JPY Fundamentals

Thursday (July 28)

• 8:30 US Unemployment Claims. Estimate 261K
• 10:30 US Natural Gas Storage. Estimate 29B
• 19:30 Japanese Household Spending. Estimate -0.4%
• 19:30 Japanese Tokyo Core CPI. Estimate -0.4%
• 19:30 Japanese National Core CPI. Estimate -0.4%
• 19:30 Japanese Unemployment Rate. Estimate 3.2%
• 19:50 Japanese Retail Sales. Estimate -1.2%
• 19:50 Japanese Preliminary Industrial Production. Estimate 0.6%
• Tentative – BoJ Monetary Policy Statement

Upcoming Key Events

Friday (July 29)

• 1:00 – BoJ Outlook Report
• Tentative – BoJ Press Conference
• 8:30 US Advance GDP. Estimate 2.6%     
• 10:00 US Revised UoM Consumer Sentiment

*Key events are in bold

*All release times are EDT

USD/JPY for Thursday, July 28, 2016

USD/JPY July 28 at 5:50 EDT

Open: 104.91 High: 105.29  Low: 104.44 Close: 104.74

USD/JPY Technical

• USD/JPY has posted slight losses in the Asian session. The pair is flat in European session
• 104.99 remains fluid and was tested in resistance earlier
• 103.73 is providing support
• Current range: 103.73 to 104.99

Further levels in both directions:

• Below: 103.73, 102.36 and 101.20
•  Above: 104.99, 105.87, 106.81 and 107.65

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing little movement on Thursday, consistent with the lack of movement from USD/JPY. Currently, long positions have a majority (65%), indicative of trader bias towards USD/JPY breaking out and moving 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.