USD/JPY – Dollar Higher Despite Soft Employment Report, Japanese Inflation Next

USD/JPY has posted higher in the Thursday session, erasing the losses on Wednesday. Currently, the pair is trading at 114.20. On the release front, US unemployment claims jumped to 259 thousand, well above the forecast of 247 thousand. New Home Sales is next, with the indicator expected to dip to 585 thousand. In Japan, SPPI came in at 0.4%, matching the forecast. Tokyo Core CPI follows later today, with the estimate standing at -0.4%.

Inflation continues to be a weak spot in the Japanese economy. Tokyo Core CPI, the most important inflation indicator, has not posted a gain since December 2015. Another decline is expected in the January release. Deflation worries aside, Japanese policymakers face another headache, as the Trump Era has begun. President Donald Trump has wasted no time in making protectionist moves which he says will benefit the US economy and save the jobs of American workers. Earlier this week, Trump signed an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement signed by the US, Japan and other Pacific nations. Japan is a major member of the TPP and will no doubt be unhappy about the US decision. Trump’s protectionist moves could hurt the Japanese economy, which is heavily reliant on its export sector. Will Japan choose to retaliate, possibly starting a trade war with the US? Tension in trade relations between the two countries could also weigh on the wobbly Japanese yen. The BoJ has been reluctant to step in and prop up the currency, but the bank could change its tune if the dollar breaks above the 120 line. In early 2016, when the yen was trading above 120, Japanese officials warned against what they termed “currency manipulations” and threatened to intervene in order to boost the yen’s value. This led to a public backlash from US officials as fears of a currency war escalated. If the yen continues to weaken and Japan again warns about intervention, we could see some friction between the two countries.

USD/JPY Fundamentals

Thursday (January 26)

• 8:30 US Unemployment Claims. Estimate 247K. Actual 259K
• 8:30 US Goods Trade Balance. Estimate -64.5B. Actual -65.0B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.9%. Actual 1.0%
• 9:45 US Flash Services PMI. Estimate 54.4
• 10:00 US New Home Sales. Estimate 585K
• 10:00 US CB Leading Index. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate -121B
• 18:30 Japanese Tokyo Core CPI. Estimate -0.4%
• 18:30 Japanese National Core CPI. Estimate -0.3%

Upcoming Key Releases

Friday (January 27)

• 8:30 US Advance GDP. Estimate 2.1%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 10:00 Revised UoM Consumer Sentiment. Estimate 98.2

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, January 26, 2017

USD/JPY January 26 at 9:40 EST

Open: 113.27 High: 114.47 Low: 113.03 Close: 114.28

USD/JPY Technical

USD/JPY edged higher in the Asian and posted considerable gains in European trade. The pair is showing little movement in the North American session

• 113.80 is providing support
• 114.83 is the next resistance line
• Current range: 113.80 to 114.83

Further levels in both directions:

• Below: 113.80, 112.57, 110.94 and 109.85
•  Above: 114.83, 115.90 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little change in the Thursday session. Currently, long and short positions are close to evenly split, indicative of a lack of trader bias as to which direction USD/JPY will take next.

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.