USD/JPY – Yen unchanged ahead of BoJ rate announcement

The Japanese yen is unchanged in the Thursday session. In the North American session, USD/JPY is trading at 110.39, up 0.04% on the day. On the release front, Japanese Revised Industrial Production fell to 0.5% but managed to beat the estimate of 0.3%. In the U.S, consumer spending reports were unexpectedly strong. Core Retail Sales climbed 0.9%, its strongest gain since November. This easily beat the forecast of 0.5%. It was a similar story for Retail Sales, which improved 0.8%, above the forecast of 0.4%. There was more good news on the employment front, as unemployment claims dropped to 218 thousand, below the estimate of 223 thousand. Later in the day, the Bank of Japan releases a rate statement, followed by a press conference with BoJ Governor Haruhiko Kuroda.

As widely expected, the Federal Reserve raised interest rates by a quarter-point, to a range between 1.75 percent and 2.00 percent. Fed Chair Jerome Powell sounded hawkish in his press conference, saying that the economy was performing well and that “overall outlook for growth remains favorable”. This message echoed the rate statement, in which policymakers said that “economic activity has been rising at a solid rate”, pointing to stronger consumer spending and business investment. What was may have been the most notable development was that the Fed rate projections were revised upwards, predicting two additional rate hikes in 2018, for a total of four hikes. Until now, the Fed had projected three rate hikes this year. This represents a nod to the strength of the U.S economy and could boost the dollar against its rivals.

The markets aren’t expecting any moves from the BoJ as it winds up its policy meeting on Thursday, as the bank is expected to hold the course with regard to fiscal and interest rate policies. Still, with the economy continuing to expand, the bank is expected to wind up its massive stimulus program. The magic question is when will the BoJ start to taper the program. Economists remain divided – some are forecasting that reductions in stimulus will begin in 2119, with others saying that won’t happen until 2020 or even later. Given the size of the stimulus program, any hints from the bank that it is considering a taper is sure to shake up the yen’s exchange rate. With inflation expected to remain below the BoJ target of around 2 percent for the near future, there isn’t much pressure on the BoJ to alter its current policy.

  Back to the drawing board

  ECB eyed after Fed raises rates

USD/JPY Fundamentals

Thursday (June 14)

• 00:30 Japanese Revised Industrial Production. Estimate 0.3%. Actual 0.5%
• 8:30 US Core Retail Sales. Estimate 0.5%. Actual 0.9%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.8%
• 8:30 US Unemployment Claims. Estimate 223K. Actual 218K
• 8:30 US Import Prices. Estimate 0.5%. Actual 0.6%
• 10:00 US Business Inventories. Estimate 0.3%. Actual 0.3%
• 10:30 US Natural Gas Storage. Estimate 87B
• Tentative – BoJ Monetary Policy Statement
• Tentative – BoJ Policy Rate. Estimate -0.10%

Friday (June 15)

• Tentative – BoJ Press Conference
• 8:30 US Empire State Manufacturing Index. Estimate 19.1
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.5

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, June 14, 2018

USD/JPY June 14 at 9:00 DST

Open: 110.34 High: 110.39 Low: 109.91 Close: 110.39

USD/JPY Technical

USD/JPY was flat in the Asian session. In European trade, the pair edged lower but then recovered these losses. The pair has recorded slight gains in the North American session

• 110.11 was tested earlier in support. It remains a weak line
• 111.22 is the next resistance line

Further levels in both directions:

• Below: 110.11, 108.89, 108.00 and 107.29
• Above: 111.22, 112.06 and 113.39
• Current range: 110.11 to 111.22

OANDA’s Open Positions Ratios

USD/JPY ratio continues to show little movement this week. Currently, long positions have a majority (60%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

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.