USD/JPY – Yen Drifting in Light Holiday Trade

USD/JPY is unchanged on Thursday, as the pair trades at 122.60 in the North American session. In economic news, there are no US releases as the markets are closed for the Thanksgiving holiday. In Japan, we’ll get a look at Household Spending, an important consumer spending indicator, as well as inflation numbers, led by Tokyo Core CPI. The markets are expecting very weak inflation numbers, as the Japanese economy is mired in a recession.

On Wednesday, key releases out of the US painted a mixed picture. Unemployment Claims plunged to 260 thousand, well off the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. UoM Consumer Sentiment improved to 91.3 points, but the markets were overly optimistic, as the estimate stood at 93.2 points. This consumer confidence indicator comes on the heels of CB Consumer Confidence, which dropped to 90.4 points, nowhere close to the estimate of 99.3 points. These weak consumer confidence readings are bound to raise concerns, as soft consumer confidence numbers could translate into weaker consumer spending, which is a key driver of economic growth.

The Bank of Japan continues to maintain its monetary policy, as the central bank stated at its October policy meeting that it would continue its asset-purchase program of about $60 billion per year. The BOJ minutes from the meeting noted that the inflation target of 2.0% will not be met before 2018, as weak global growth and a planned sales tax will likely hamper economic growth. Policymakers said that the weak Japanese yen had not had a significant effect on the economy.

The guessing game continues – will the Federal Reserve pull the rate trigger in December? Last week’s Fed minutes did not confirm a rate hike, but most analysts feel that the long-awaited move will indeed occur next month. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves will not cause turbulence on the global markets. One fly in the ointment is that of weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from a Fed member will be under close scrutiny from the markets.

USD/JPY Fundamentals

Thursday (Nov. 26)

• 23:30 Japanese Household Spending. Estimate 0.0%
• 23:30 Japanese Tokyo Core CPI. Estimate -0.1% 
• 23:30 Japanese National Core CPI. Estimate -0.1%
• 23:30 Japanese Unemployment Rate. Estimate 3.4%  
• All Day – US Bank Holiday

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Thursday, November 26, 2015

USD/JPY November 26 at 16:45 GMT

USD/JPY 122.57 H: 122.70 L: 122.50

USD/JPY Technical

• On the upside, 123.74 has some breathing room as the pair trades at lower levels.
• On the downside, 122.40 is under pressure.
• Current range: 122.40 to 123.74

Further levels in both directions:

• Below: 122.40, 121.50, 120.40 and 118.53
• Above: 123.74, 125.63 and 126.84

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged, reflective of a lack of movement from the pair. Long positions retain a solid majority of positions (59:41), which is indicative of strong trader bias towards the pair moving 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.