USD/JPY – Japanese Yen Subdued Ahead of Powell Testimony

The Japanese yen is almost unchanged in the Monday session. In North American trade, USD/JPY is trading at 106.84, down 0.03% on the day. On the release front, it’s a quiet start to the week. US New Home Sales dropped to 593 thousand, well off the estimate of 655 thousand. This marked the smallest gain since August. Tuesday will be much busier, with the US releasing durable goods and consumer confidence reports. As well, Federal Chair Jerome Powell will testify before the House Financial Services Committee.

It hasn’t been a smooth ride for Jerome Powell, who took over as chair of the Federal Reserve from Janet Yellen earlier this month. Powell received a rude welcome from the markets just after moving into his new office, as the global stock market correction erased some $4 trillion in valuations. The volatility forced Powell to make a public statement, reassuring the markets that the Fed was  closely monitoring the situation. Powell will be on center stage this week, when he makes separate appearances before the House of Representatives and the Senate. After the recent stock markets volatility, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.

Bank of Japan Governor Harohiko Kuroda was recently reward with a second 5-year term, and has lost no time in defending his monetary policy. Speaking in parliament on Monday, Kuroda said he had no plans to conduct a review as to why the Bank’s massive stimulus program had failed to raise inflation to the target of just under 2 percent. Kuroda said it was “unfortunate” that the target had not been met, but argued that the BoJ’s “powerful” monetary easing had eliminated deflation. Kuroda’s comments were another clear message that the BoJ will not be reducing its massive stimulus program anytime soon. The Japanese economy has rebounded, but inflation has not kept pace, with core consumer inflation climbing just 0.9% in January.

USD/JPY Fundamentals

Monday (February 26)

• 10:00 US New Home Sales. Estimate 655K. Actual 593K
• 15:15 US FOMC Member Randal Quarles Speaks

Tuesday (February 27)

• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Durable Goods Orders. Estimate -2.4%
• 10:00 US CB Consumer Confidence. Estimate 126.2

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 26, 2018

USD/JPY February 26 at 11:40 EST

Open: 106.88 High: 107.21 Low: 106.38 Close: 106.84

USD/JPY Technical

USD/JPY lost ground in the Asian session but has recovered these losses after posting slight gains in the European and North American sessions

• 106.64 is providing support
• 107.29 remains a weak resistance line

Current range: 106.64 to 107.29

Further levels in both directions:

• Below: 106.64, 105.53 and 104.32
• Above: 107.29, 108.00, 109.11 and 110.48

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (64%). This is indicative of trader bias towards USD/JPY 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.