USD/JPY – Yen Dips to 3-Week Lows, Japanese Mfg. Report Next

USD/JPY has edged higher in the Thursday session. Currently, the pair is trading at 114.60. In Japan, Average Cash Earnings improved to 0.5%, above the estimate of 0.3%. This marked the highest gain since July 2016. Preliminary Machine Tool Orders jumped to 9.1%. Later in the day, we’ll get a look at a key manufacturing report, the BSI Manufacturing Index. The indicator is expected to climb to 8.4 points. In the US, today’s key event is unemployment claims, with the markets expecting the indicator to climb to 239 thousand. On Friday, employment numbers will again be in the spotlight, with the release of Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

The Japanese manufacturing sector has long been a weak spot in the economy. However, the sector has been showing signs of improvement in 2017. After over a year of declines, Preliminary Machine Tool Orders has posted two straight gains, including a strong gain of 9.1% in February. The BSI Manufacturing Index, a quarterly indicator, is also pointing upwards. The index, which is based on a survey of large manufacturers, improved to 7.5 in the fourth quarter, pointing to optimism. The markets are predicting even better news in Q1, with the estimate standing at 8.4 points. Meanwhile, the Japanese yen has lost ground in March, falling 1.3 percent. The yen is within striking distance of the 115 line, which has held in resistance since January 27.

The Federal Reserve waited an entire year to raise rates in December, but appears ready to make a March move. The odds of a March hike continue to climb, and are currently at 88% percent, according to the CME Group. Fed policymakers have been dropping hints of a March move, and a red-hot labor market and higher inflation levels present further arguments in favor of higher rates. Earlier in the year, the Fed had said that it wanted to wait until it had a clearer idea of President Trump’s economic policy before it tightened monetary policy. However, Trump has not backed up his promises to reform the tax code and increase fiscal spending with any details. Some Fed policymakers wanted to raise rates earlier this year, so Fed Chair Yellen is under pressure to make a move, and it appears virtually certain that the Fed will raise rates by a quarter-point on March 15.

USD/JPY Fundamentals

Wednesday (March 8)

• 18:50 Japanese M2 Money Stock. Estimate 4.2%. Actual 4.2%
• 19:00 Japanese Average Cash Earnings. Estimate 0.3%. Actual 0.5%

Thursday (March 9)

• 00:59 Japanese Preliminary Machine Tool Orders. Actual 9.1%
• 7:30 US Challenger Job Cuts
• 8:30 US Unemployment Claims. Estimate 239K
• 8:30 US Import Prices. Estimate 0.1%
• 10:30 US Natural Gas Storage. Estimate -59B
• 13:01 US 30-y Bond Auction
• 18:50 Japanese BSI Manufacturing Index. Estimate 8.4

Upcoming Key Events

Friday (March 10)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 185K
• 8:30 US Unemployment Rate. Estimate 4.7%

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, March 9, 2017

USD/JPY March 9 at 7:30 EST

Open: 114.41 High: 114.93 Low: 114.35 Close: 114.64

USD/JPY Technical

USD/JPY was flat in the Asian session. In European trade, the pair has posted gains but has retracted

• 113.80 is providing support
• 114.83 was tested in resistance earlier and is a weak line
• Current range: 113.80 to 114.83

Further levels in both directions:

• Below: 113,80, 112.57, 110.94, and 109.77
•  Above: 114.83, 115.90 and 116.88

OANDA’s Open Positions Ratio

In the Thursday session, USD/JPY ratio is showing long positions with a majority (56%), indicative of slight trader bias towards USD/JPY 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.