USD/JPY – With US Holiday, Markets Eye BOJ Minutes

With the US markets closed for the Columbus Day holiday, USD/JPY is showing almost no movement in light trade. Early in the North American session, the pair is trading at the 120 level. There are no US economic releases on Monday. Three Fed Reserve FOMC members speak on Monday, and the markets will be looking for some direction as to when the Fed might raise rates, especially as the markets didn’t have much to digest in last week’s FOMC minutes. Traders should keep a close eye on the only major event of the day as, the BOJ releases the minutes of last week’s policy meeting.

The Bank of Japan released its policy meeting statement last week, and there were no surprises from the central bank. The BOJ said it would continue its current level of asset purchases (about $50 billion/mth) and noted that the Japanese economy continues to “recover moderately”. At the same time, the BOJ acknowledged that the Japanese economy has slowed down due to weak domestic activity and lower demand for Japanese exports. So far, the BOJ has managed to avoid expanding an already huge monetary stimulus program, but with inflation under the 1% level, which is a far cry from the government target of 2%, the BOJ may have to act in the near future if the economy doesn’t pick up at a faster pace. The markets will be looking for hints in the minutes about a change in the BOJ’s monetary policy – any comments from policymakers in favor of expanding current easing levels could push the yen downwards.

The Fed minutes are now behind us, but the key question remains – will the Federal Reserve press the trigger and raise rates in 2015? The markets had circled September as a likely candidate for a rate hike, but the Federal Reserve remained on the sidelines yet again. The Fed released the minutes of its September policy meeting last week, and indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases, such as GDP or  employment numbers, which match or beat expectations. FOMC member Dennis Lockhart sounded somewhat optimistic about a rate hike in October or December, but noted that the domestic economy, especially consumer indicators, would have to be strong in order for the Fed to raise rates. Lockhart and two other FOMC members will be speaking on Monday, and the markets will be paying close attention.

USD/JPY Fundamentals

Monday (Oct. 12)

• 12:10 Federal Reserve FOMC Member Denis Lockhart Speaks.
• 14:30 Federal Reserve FOMC Member Charles Evans Speaks.
• 20:30 Federal Reserve FOMC Member Lael Brainard Speaks.

Upcoming Key Events

Monday (Oct. 12)

• 23:50 Bank of Japan Policy Meeting Minutes.

USD/JPY for Monday, October 12, 2015

USD/JPY October 12 at 15:30 GMT

USD/JPY 119.95 H: 119.96 L: 119.83

USD/JPY Technical

• USD/JPY has been uneventful throughout the day.
• 118.53 is providing strong support.
• 120.40 remains an immediate resistance line.
• Current range: 118.53 to 120.40

Further levels in both directions:

• Below: 118.53, 116.90, 115.90 and 113.86
• Above: 120.40, 121.50, 122.40 and 123.50

OANDA’s Open Positions Ratio

USD/JPY ratio is indicating slight movement towards short positions. Still, a majority of long positions remain long (56%), indicative of slight trader bias towards the US dollar breaking out and moving to higher ground.

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.