USD/JPY – Yen Edges Higher as Japanese Trade Surplus Climbs

The Japanese yen has started the week with gains. In North American trade, USD/JPY is trading at 112.39, down 0.20% on the day. On the release front, Japan’s trade surplus widened to JPY 0.36 trillion, well above the forecast of JPY 0.27 trillion. There are no major events out of the US. On Tuesday, the US releases Building Permits, Current Account and Housing Starts.

Investors are keeping an eye on the Bank of Japan, which holds a policy meeting on Wednesday and Thursday. The BoJ is expected to hold the course and make no changes to interest rates and its stimulus package. Japan’s economy has rebounded in 2017, as a stronger global economy has boosted the country’s export and manufacturing sectors. Still, ultra-low interest rates have resulted in a weak yen, much to the angst of Japan’s trading partners, which has accused Tokyo of manipulating the exchange rate in order to boost exports. Although BoJ Governor Haruhiko Kuroda has dropped some hints about reducing stimulus, absent a surge in inflation, such a move is unlikely in the near future.

It could be a busy week in the currency markets, as the Trump tax plan sprints to the finish line after feverish efforts by the Republicans. On Friday, the House and the Senate reconciled their tax bills. The uniform bill now goes to both branches, where it is expected to muster the necessary votes, even with all Democrats expected to vote against the bill. Crucially, two Republican senators who were opposed to the bill have now lent their support to the bill. The legislation is the first major overhaul of the US tax code in 30 years, and would reduce corporate tax from 45 percent to 21 percent. If the tax reform bill becomes law, it would mark the first significant legislation for Trump, after one year in office.

USD/JPY Fundamentals

Sunday (December 17)

• 18:50 Japanese Trade Balance. Estimate 0.27T. Actual 0.36T

Monday (December 18)

• 10:00 US NAHB Housing Market Index. Estimate 70. Actual 74

Tuesday (December 18)

• 8:30 US Building Permits. Estimate 1.28M
• 8:30 US Current Account. Estimate -117B
• 8:30 US Housing Starts. Estimate 1.25M
• Tentative – US FOMC Member Neel Kashkari Speaks
• 23:30 Japanese All Industries Activity. Estimate 0.4%

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, December 18, 2017

USD/JPY December 18 at 11:20 EDT

Open: 112.62 High: 112.83 Low: 112.38 Close: 112.39

USD/JPY Technical

USD/JPY showed little movement in the Asian session. The pair edged lower in the European session and continues to head lower in North American trade

• 111.53 is the next support line
• 112.57 is fluid. Currently, it is a weak resistance line

Current range: 111.53 to 112.57

Further levels in both directions:

• Below: 111.53, 110.10 and 109.11
• Above: 112.57, 113.55, 114.59 and 115.50

OANDA’s Open Positions Ratios

USD/JPY ratio is showing limited movement in the Monday session. Currently, long positions are at 51%, indicative of a lack of trader bias as to what direction USD/JPY will take next.

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.