USD/JPY – Dollar Drops Below 111 Yen, US Housing Report Next

The Japanese yen has posted gains in the Monday session. In North American trade, USD/JPY is trading at 110.94, down 0.53% on the day. On the release front, SPPI edged lower to 0.8%, just shy of the estimate of 0.9%. In the US, the sole indicator is New Home Sales, which is expected to slow to 627 thousand. On Tuesday, the US releases CB Consumer Confidence, with an estimate of 123.9 points. We’ll also hear from Fed Chair Designate Jerome Powell and Treasury Secretary Steven Mnuchin.

The changing of the guard at the Federal Reserve starts this week, as Jerome Powell testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Will Powell be a clone of outgoing chair Janet Yellen? Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

The Bank of Japan has declared more than once that it will hold the course on its massive easing program, even though the Japanese economy has rebounded in 2017, in large part due to stronger global demand for Japanese products. Recently, however, there have been some slight hints that the Bank of Japan might be having second thoughts. BoJ Governor Haruhiko Kuroda recently acknowledged that ongoing easing could hurt bank margins. Kuroda said that BoJ needed to pay attention to the “reversal rate”, whereby a rate cut by the central bank discourages bank lending. Still, most economists don’t expect a cutting of stimulus until in the near future, so any hints of a change in the status quo would likely shake up the Japanese yen.

USD/JPY Fundamentals

Sunday (November 26)

• 18:50 Japanese SPPI. Estimate 0.9%. Actual 0.8%

Monday (November 27)

• 10:00 US New Home Sales. Estimate 627K
• 17:30 US FOMC Member Neel Kashkari Speaks
• 19:00 US FOMC Member William Dudley Speaks

Tuesday (November 28)

• 10:00 US CB Consumer Confidence. Estimate 123.9
• 10:00 Fed Chair Designate Jerome Powell Speaks
• 15:45 US Treasury Secretary Steven Mnuchin Speaks
• 18:50 Japanese Retail Sales. Estimate 0.1%

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, November 27, 2017

USD/JPY November 27 at 9:25 EDT

Open: 111.53 High: 111.69 Low: 110.88 Close: 110.93

USD/JPY Technical

USD/JPY inched lower in the Asian session and posted further losses in European trade. The pair is showing little movement in North American trade

• 111.10 is providing support
• 111.53 is the next resistance line

Current range: 110.10 to 111.53

Further levels in both directions:

• Below: 110.10, 109.12 and 108.25
• Above: 111.53, 112.57, 113.55 and 114.59

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is almost evenly split between long and short positions. This is indicative of a lack of trader bias as to what 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.