USD/JPY – Yen Edges Lower on Mixed Japanese Data

USD/JPY has edged lower on Thursday, erasing the gains seen in the Wednesday session. Currently, USD/JPY is trading at 101.60. On the release front, Japanese Current Account dropped to JPY 1.45 trillion, short of the estimate of JPY 1.59 trillion. Japanese GDP gained 0.2%, above the estimate of 0.0%.  In the US, today’s highlight is unemployment claims, with the indicator expected to remain steady at 264 thousand.

Japanese numbers were a mixed bag on Wednesday. Japan’s current account surplus dropped sharply to JPY 1.45 trillion in July, down from 1.65 trillion in the previous release. There was better news from the second quarter Final GDP report, which posted a modest gain of 0.2%. This reading was revised upwards from the preliminary estimate of 0.0%. Year-on-year, GDP in Q2 gained 0.7 percent. However, business investment and exports were down in the second quarter, and without government spending, the economy would have contracted. The Bank of Japan has cut rates into negative territory, but has had little success in coaxing inflation to higher levels. Will the bank adopt further easing measures at the policy meeting on September 21? BOJ Governor Harihuko Kuroda has been mum about what steps the bank might take, although lowering rates or expanding the asset-purchase scheme (or some combination) are the most likely routes. In addition to its standard rate announcement, the BoJ has said it will also conduct a review of the economy at the meeting.

An upbeat speech from Federal Reserve chair Janet Yellen at the Jackson Hole summit renewed speculation about a rate hike before the end of 2016. However, a spate of weak US numbers in the past week has lowered the likelihood of a move by the Fed. The CME FedWatch Tool is showing a substantial drop in the odds of a rate hike for both September and December – the likelihood of a September rise has dropped to 15%, while the odds of a December hike are down to 39%. Even though the US labor market remains close to full capacity, many FOMC members remain uneasy about a rate hike, especially given the persistent lack of inflation in the economy. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. These releases could play a critical role in determining if the Fed presses the rate trigger this month, or decides to revisit the rate question in December, exactly a year from the last rate hike.

USD/JPY Fundamentals

Wednesday (September 7)

• 19:50 Japanese Current Account. Estimate 1.59T. Actual 1.45T
• 19:50 Japanese Final GDP. Estimate 0.0%. Actual 0.2% 
• 19:50 Japanese Bank Lending. Actual 2.0%
• 19:50 Japanese Final GDP Price Index. Estimate 0.8%. Actual 0.7%

Thursday (September 8)

• 1:00 Japanese Economy Watchers Sentiment. Estimate 45.2. Actual 45.6
• 8:30 US Unemployment Claims. Estimate 264K
• 10:30 US Natural Gas Storage. Estimate 44B
• 11:30 US Crude Oil Inventories. Estimate 0.6M
• 15:00 US Consumer Credit. Estimate 15.7B
• 19:50 Japanese M2 Money Stock. Estimate 3.3%

*All release times are EDT

*Key events are in bold

USD/JPY for Thursday, September 8, 2016

USD/JPY September 8 at 10:40 EDT

Open: 101.84 High: 101.91 Low: 101.40 Close: 101.62

USD/JPY Technical

• USD/JPY has been flat in the Asian and European sessions
• 101.20 is providing support
• There is resistance at 102.36
• Current range: 101.20 to 102.36

Further levels in both directions:

• Below: 101.20, 99.71 and 98.95
•  Above: 102.36, 103.73, 104.99 and 106.38

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Thursday, consistent with the lack of movement from USD/JPY. Currently, long positions have a majority (63%), indicative of trader bias towards USD/JPY reversing directions and moving 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.