USD/JPY – Dollar Posts Slight Gains on Weak Japanese GDP

The Japanese has posted considerable gains on Monday, as USD/JPY trades slightly above the 114.30 line in the North American session. On the release front, Japanese GDP disappointed with a weak reading of -0.4%. Japanese manufacturing numbers were weak, as Revised Industrial Production and Tertiary Industry Activity both missed their estimates.

The Japanese yen has lost some of its recent shine, as USD/JPY has improved 160 points since late last week. The pair gained some ground as Preliminary Japanese GDP indicated a decline of -0.4% in the fourth quarter. This followed a decline of 0.2% in Final GDP for Q3. The Chinese slowdown has hurt the Japanese economy, as China is one of Japan’s major trading partners. To make matters worse, Japanese consumer spending has fallen off and the housing and manufacturing sectors are in poor shape as a result. Despite all the gloom and doom, the Japanese yen has not only held its own against the strong US dollar, but posted a superb rally. The secret to the yen’s recent success? The Japanese currency has benefited from its traditional safe-haven status, as global financial instability has driven investors away from risk assets towards safer waters like the yen.

Last week, Federal Reserve Chair Janet Yellen testified before both houses of Congress, and her message was markedly different than the upbeat statement from the Fed back in the heady days of December. At that time, the Fed raised rates by 0.25%, the first upward move in a decade, and hinted at a series of rate hikes in 2016. Fast forward to February, and Yellen discussed negative interest rates. The Fed has rejected making such a move in the past, and this is unlikely to change. Still, it is a relevant scenario, with the Bank of Japan joining the ECB in implementing negative rates. Yellen noted that inflation rates have remained very low due to the strong US dollar and weak oil prices. Given the current economic situation, many experts expect no more than two rate hikes this year, perhaps in June and December. At the same time, any improvement in key US numbers will heat up speculation about a possible March hike.

USD/JPY Fundamentals

Sunday (Feb. 13)

23:50 Japanese Preliminary GDP. Estimate -0.3%. Actual -0.4%

Monday (Feb. 15)

• 4:30 Japanese Revised Industrial Production. Estimate -1.3%. Actual -1.7%
• 4:34 Japanese Tertiary Industry Activity. Estimate 0.1%. Actual -0.6%

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, February 15, 2016

USD/JPY February 15 at 8:10 EST

Open: 113.37 Low: 113.27 High: 114.34 Close: 114.33

USD/JPY Technical

• USD/JPY posted light losses in the Asian session but has recovered in European trade
• 114.65 was tested earlier in support and is a weak line
• There is resistance at 115.90
• Current range: 114.65 to 115.90

Further levels in both directions:

• Below: 113.86, 112.48 and 111.50
• Above: 114.65, 115.90, 116.88 and 118.53

OANDA’s Open Positions Ratio

USD/JPY ratio shows long positions with a strong majority (67%). This is indicative of strong trader bias towards the pair 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.