USD/JPY – Yen Slide Continues as Markets Eye Trump Tax Announcement

USD/JPY has posted gains in the Wednesday session, continuing the upward trend which marked Tuesday trading. In the North American session, the dollar is trading at 111.50. The Japanese yen has dropped 1.6 percent since Monday and is trading at 4-week highs. In economic news, the sole US event is Crude Oil Inventories, which is expected to post a decline of 1.1 million barrels. Later in the day, the BoJ releases its monetary policy statement. On Thursday, the US releases durable goods orders and unemployment claims, while Japan publishes key consumer data – Household Spending and Tokyo Core CPI.

The Bank of Japan is expected to hold the course and maintain interest rates at -0.10%. The negative rates are part of the BoJ’s ultra-loose monetary policy, which is expected to continue until inflation levels move closer to the central bank’s target of around 2 percent. Japan’s economy has improved in recent months, as a weak yen and stronger global demand have boosted exports and revitalized the manufacturing sector. At the same time, consumer inflation and spending data remains weak, which has weighed on the economy. Household Spending and Tokyo Core CPI, which are key consumer indicators, are both expected to post declines. If these readings are softer than expected, the dollar’s rally against the yen could continue.

President Donald Trump has set his sights on tax reform, and is expected to make a key announcement on Wednesday. Of particular interest to the corporate sector, Trump is expected to propose reducing the corporate tax rate from 35% to 15%, and lowering the tax on multinationals’ overseas profits from 35% to 10%. Global markets are eagerly awaiting Trump’s statement, but if the president is short on details, as has often been the case, the ensuing disappointment from investors could send the dollar downwards.

Trump’s Tax Trade and Spend Defines Dollar Direction

US consumer confidence levels remain high, but there was some disappointment as CB Consumer Confidence dropped to 120.3 in April, missing the estimate of 123.7. What is troubling analysts is that strong consumer confidence numbers have not translated into increased consumer spending, a key component of economic growth. This trend has been labeled the “hard/soft discrepancy” (confidence being ‘soft’, while actual spending being ‘hard’). This was underscored in March retail sales numbers, which came in at a flat 0.0%, shy of the forecast. Next up is Advance GDP on Friday, which is expected at 1.3 percent. An unexpected GDP reading could have a sharp impact on EUR/USD.

USD/JPY Fundamentals

Wednesday (April 26)

• 00:30 Japanese All Industries Activity. Estimate 0.8%. Actual 0.7%
• 10:30 US Crude Oil Inventories. Estimate -1.1M
• 23:50 BoJ Monetary Policy Statement

Thursday (April 27)

• Tentative – BoJ Outlook Report
• Tentative – BOJ Policy Rate. Estimate -0.10%
• 2:30 BoJ Press Conference
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Unemployment Claims. Estimate 241K
• 19:30 Japanese Household Spending. Estimate -0.6%
• 19:30 Japanese Tokyo Core CPI. Estimate -0.2%

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, April 26, 2017

USD/JPY April 26 at 10:05 EST

Open: 111.07 High: 111.74 Low: 111.03 Close: 111.49

USD/JPY Technical

USD/JPY posted gains in the Asian session and was steady in European trade. In North American trade, the pair posted gains but then retracted

• 110.94 is providing support
• 112.57 is the next line of resistance
• Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 109.77, 108.54 and 107.49
•  Above: 112.57, 113.55 and 114.96

OANDA’s Open Positions Ratio

In the Wednesday session, USD/JPY is almost unchanged. Currently, long positions have a majority (62%), indicative of trader bias towards USD/JPY continuing to rise.

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.