USD/JPY – Yen edges higher, BoJ holds course

The Japanese yen has posted slight gains in the Wednesday session, after recording losses in the past two sessions. In North American trade, USD/JPY is trading at 113.15, up 0.06% on the day. On the release front, the Bank of Japan maintained its monetary policy. Japanese Preliminary Industrial Production dropped 1.1%, its fourth decline in five months. This was a much steeper decline than the estimate of -0.3%. Housing Starts slipped 1.5%, while consumer confidence came in at 43.0 points. Both indicators fell short of their estimates. In the U.S, ADP nonfarm payrolls came in at 227 thousand, much stronger than the estimate of 188 thousand. This is the first of a host of employment releases, highlighted by wage growth and nonfarm payrolls on Friday. On Thursday, the U.S releases unemployment claims and ISM Manufacturing PMI.

As expected, there were no surprises from the Bank of Japan, which wrapped up a policy meeting on Wednesday. Policymakers voted 7-2 to maintain interest rates at -0.10% and 10-year bond yields around zero. The BoJ said that it would maintain ultra-low rates for an “extended period” and the would allow more flexibility in the movement of 10-year bonds. On the inflation front, the BoJ reiterated that inflation levels would not reach the BoJ’s target of 2% before March 2021. The policy statement added that there were currently more downside risks to the economy than upside, due to the impact of the tariff war between the U.S and China as well as the impasse over Brexit negotiations.

Japanese retail sales in September posted a solid gain of 2.1%, matching the estimate. This was the 11th straight gain in retail sales, pointing to strong consumer spending, a key driver of economic growth. The Japanese Ministry of Economy, Trade and Industry (METI) noted that high costs for food and energy boosted retail sales. METI upgraded its assessment, saying that retail sales were improving “gradually”. At the same time, the export-reliant Japanese economy is very vulnerable to the fall-out from the global trade war, and the threat by President Trump to impose tariffs on all Chinese goods could spell more headwinds for the Japanese yen.

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USD/JPY Fundamentals

Tuesday (October 30)

• 19:50 Japanese Preliminary Industrial Production. Estimate -0.3%. Actual -1.1%
• 23:08 BoJ Monetary Policy Statement
• 23:08 BoJ Monetary Policy Rate. Estimate -0.10%. Actual -0.10%
• 23:08 BoJ Monetary Outlook Report

Wednesday (October 31)

• 1:00 Japanese Housing Starts. Estimate -0.7%. Actual -1.5%
• 1:02 Japanese Consumer Confidence. Estimate 43.5. Actual 43.0
• 2:30 BoJ Press Conference
• 8:15 US ADP Nonfarm Employment Change. Estimate 188K. Actual 227K
• 8:30 US Employment Cost Index. Estimate 0.7%. Actual 0.8%
• 9:45 Chicago PMI. Estimate 60.1. Actual 58.4
• 10:30 US Crude Oil Inventories. Estimate 3.6M. Actual 3.2M
• 8:30 Japanese Final Manufacturing PMI. Estimate 53.1
• 23:35 Japanese 10-year Bond Auction

Thursday (November 1)

• 8:30 US Unemployment Claims. Estimate 213K
• 10:00 US ISM Manufacturing PMI. Estimate 59.0

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, October 31, 2018

USD/JPY October 31 at 12:20 DST

Open: 113.08 High: 113.39 Low: 112.82 Close: 112.89

USD/JPY Technical

USD/JPY ticked higher in the Asian session and showed limited movement in European trade. The pair posted slight gains in the North American session but has reversed directions and posted losses

• 112.30 is providing support
• 113.75 is the next line of resistance
• Current range: 112.30 to 113.75

Further levels in both directions:

• Below: 112.30, 111.20, 110.28 and 109.32
• Above: 113.75, 114.73 and 115.50

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.