USD/JPY – Yen Higher as US Dollar Falters After Trump Theatrics

USD/JPY is considerably lower in the Thursday session. Currently, the pair is trading at 114.30. On the release front, Japan’s current surplus narrowed to JPY 1.80 trillion, but this easily beat the estimate of 1.48 trillion. In the US, today’s highlight is unemployment claims, with the indicator expected to rise to 266 thousand. We’ll also hear from two FOMC members – Charles Evans and Patrick Harker. Friday promises to be busy, with the US releasing retail sales and consumer confidence reports.

There was plenty of anticipation ahead of Donald Trump’s press conference on Thursday, but the event quickly turned into a spectacle rather than a platform outlying the president-elect’s plans as president. The markets were hoping to hear some specifics about Trump’s economic policy, but the president-elect didn’t comply. Instead, Trump focused on attacking the media for releasing damaging material on him, and also presented his plan to avoid business conflicts while in office. The markets were clearly disappointed with the theatrics and the US dollar was broadly lower after the press conference.

During the recent presidential campaign, Trump had plenty to say about the ills of the US economy on the campaign trail, but was short on solutions. He has gone on record promising tax cuts and significant fiscal spending to repair the country’s infrastructure. This has led to expectations of reflation in the US, after years of low inflation levels. What does this mean for the currency markets? Lower taxes and higher spending (assuming both can be done simultaneously), would boost the US economy and raise inflation levels. This would likely lead to further rate hikes, which is bullish for the US dollar. The greenback has impressed since the US election, posting gains against most of its major rivals.

It was a dismal fourth quarter for the Japanese yen, as USD/JPY plunged 11.4 percent. However, the yen has moved higher in the New Year. Earlier on Thursday, USD/JPY dropped below the 114 line, its lowest level since December 8. Japanese consumers remain pessimistic about the economy, but there was a silver lining from the latest Consumer Confidence indicator, which rose to 43.1 points in December. This figure beat expectations and marked the indicator’s highest level since September 2013. Will the economy improve in 2017? There are some positive signs as we enter 2017. A weaker Japanese yen has boosted exports, and the Bank of Japan has given the economy a cautious thumbs-up, raising its growth projections. If improving consumer confidence translates into stronger consumer spending, economic growth could improve.

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USD/JPY Fundamentals

Wednesday (January 11)

• 18:50 Japanese Bank Lending. Estimate 2.4%. Actual 2.6%
• 18:50 Japanese Current Account. Estimate 1.48T. Actual 1.80T

Thursday (January 12)

• 00:00 Japanese Economy Watchers Sentiment. Estimate 49.3. Actual 51.4
• 8:30 US Unemployment Claims. Estimate 266K
• 8:30 US FOMC Member Charles Evans Speech
• 8:30 US FOMC Member Patrick Harker Speech
• 8:30 US Import Prices. Estimate 0.8%
• 10:30 US Natural Gas Storage. Estimate -150B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 21.0B
• 18:50 Japanese M2 Money Stock. Estimate 4.1%
• 19:00 Federal Reserve Chair Janet Yellen Speech

Friday (January 13)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Retail Sales. Estimate 0.5%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.6

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, January 12, 2017

USD/JPY January 12 at 6:40 EST

Open: 115.09 High: 115.24 Low: 113.73 Close: 114.34

USD/JPY Technical

• USD/JPY continues to break through support levels.  The pair has posted losses in the Asian and European sessions
• 113.80 is a weak support line
• 114.83 is the next resistance line
• Current range: 113.80 to 114.83

Further levels in both directions:

• Below: 113.80, 112.57 and 110.94
•  Above: 114.83, 115.88 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in short positions. Currently, short positions have a majority (54%), indicative of trader bias towards USD/JPY moving to lower levels.

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.