USD/JPY – Yen Dips, Markets Eye Japanese Current Account

The Japanese yen has reversed directions at the start of the new trading week, posting considerable losses. USD/JPY is trading at 117.70 in Monday’s European session. On the release front, it’s a quiet day, with three events on the schedule. Today’s highlight is Japanese Current Account, with the markets expecting the surplus to increase to JPY 1.52 billion.

The New Year started in superb fashion for the yen, which gained close to 300 points last week. Investors started buying the safe-haven yen early last week, following weak Chinese manufacturing data, which underscored the slowdown affecting the world’s second largest economy. Rising tensions between Saudi Arabia and Iran and a surprise nuclear device test by North Korea further decreased any appetite for risk. The yen received a further helping hand as China devalued its currency, the yuan, by over 0.5%. This move resulted in sharp declines on world stock markets and propelled the yen to its highest levels against the greenback since August.

The first trading week of 2016 ended on a high note, as US Nonfarm Payrolls surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months, and underscores a strong US employment market. The unemployment rate remained unchanged at 5.0 percent. The Fed will probably not make another move at its policy meeting at the end of January, so soon after the historic rate hike in December. However, many experts are expecting that the Fed will raise interest rates in March. Such a move would likely make the US dollar assets more attractive to investors and boost the greenback against its rivals. If the US economy continues to heat up, the Fed is expected to continue to tighten monetary policy over the course of 2016.

The Federal Reserve released the minutes of its historic December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate hike was the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

USD/JPY Fundamentals

Monday (Jan. 11)

• 10:00 US Labor Market Conditions Index
• 18:50 Japanese Current Account. Estimate 1.52T 
• 18:50 Japanese Bank Lending  

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, January 11, 2016

USD/JPY January 11 at 12:45 GMT

Open: 117.07 High: 117.91 Low: 116.97 Close: 117.73

USD/JPY Technical

• USD/JPY was choppy in the Asian session and has posted gains in the European session.
• 116.88 is providing support
• There is strong resistance at 118.53
• Current range: 116.88 to 118.53

Further levels in both directions:

• Below: 116.88, 115.45 and 113.23
• Above: 118.53, 120.40, 121.50 and 122.40

OANDA’s Open Positions Ratio

USD/JPY ratio remains unchanged on Monday. Long positions continue to command a solid majority (66%), which 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.