USD/JPY – Dollar Punches Above 115, Tankan Indices Next

USD/JPY has posted gains on Tuesday, erasing the losses which marked the Monday session. Currently, the pair is trading at 115.40. On the release front, Japan will publish the Tankan indices for the third quarter, with both indicators expected to show gains. On Wednesday, the Federal Reserve sets the benchmark interest rate and we’ll also get a look at US retail sales reports.

The Japanese yen remains under pressure, trading above the 115 level. It’s been a dismal fourth quarter for the currency, as USD/JPY has surged a remarkable 10.4% since October 1. The yen received no help from GDP data, as Final GDP for the third quarter edged up to 0.3%, short of the forecast of 0.6%. This figure disappointed the markets, as Preliminary GDP for Q3 came in at 0.5%. This downward revision will likely renew fears of a weakening recovery. The Bank of Japan will meet on December 18, and is expected to leave interest rates unchanged at -0.10%. Despite a sluggish economy, the bank has been hesitant to step in and ease policy, as negative rates have done little to kick-start economic growth or raise anemic inflation levels.

All eyes are on the Federal Reserve, which meets for a crucial policy meeting on Wednesday. The markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback.  Even though the rate hike has been expected (and priced in) for some time, such a momentous move could boost the greenback following a rate hike. What can we expect from the Fed after the hike? The Fed has indicated that it plans to raise rates gradually in 2017. However, this could change, given Trump’s declarations to increase government spending and cut taxes, which could lead to higher inflation levels. Once the new administration’s economic policies become clearer, the Fed may send signals to the markets as to its rate plans in early 2017.

USD/JPY Fundamentals

Tuesday (December 13)

• 11:00 US NFIB Small Business Index. Estimate 96.7
• 13:30 US Import Prices. Estimate -0.3%
• 18:01 US 30-year Bond Auction
• 18:50 Japanese Tankan Manufacturing Index. Estimate 10 points
• 18:50 Japanese Tankan Non-Manufacturing Index. Estimate 19 points
• 23:30 Japanese Revised Industrial Production. Estimate 0.1%

Upcoming Key Events

Wednesday (December 14)

• 8:30 US Core Retail Sales. Estimate 0.4%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Retail Sales. Estimate 0.3%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <0.75%
• 14:30 US FOMC Press Conference

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, December 13, 2016

USD/JPY December 13 at 6:40 EST

Open: 114.97 High: 115.44 Low: 114.77 Close: 115.41

USD/JPY Technical

• USD/JPY posted small gains in the Asian session. The pair continues to post gains in European trade
• 114.13 is a strong support line
• 115.88 is the next line of resistance
• Current range: 114.13 to 115.88

Further levels in both directions:

• Below: 114.13, 113.86, 112.48 and 111.45
•  Above: 115.88, 116.88 and 118.05

OANDA’s Open Positions Ratio

USD/JPY ratio is showing short positions with a strong majority (59%). This is indicative of trader bias towards USD/JPY reversing directions and moving lower.

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.