USD/JPY – Yen Edges Lower in Thin Holiday Trade

The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 106.54, up 0.23% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In Japan, the current account surplus jumped to JPY 0.37 trillion in January, up from JPY 0.09 trillion a month earlier. This easily  beat the estimate of JPY 0.14 trillion. On Tuesday, Japan releases Manufacturing PMI and All Industries Activity.

The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points.

The yen enjoyed a banner week, as the currency climbed 2.5% this week. This marked the strongest weekly gain since July. Nervous investors continued to snap up the safe-haven yen, as stock markets across the globe continued to show volatility, draining risk appetite. On Friday, the dollar dropped below 106 yen for the first time since November. If the markets continue to fluctuate during the week, the yen rally could continue.

Bank of Japan Governor Harohiko Kuroda has been reappointed to another 5-year term, the first time a BoJ governor has received a second term in 60 years. The move is a clear message from the Bank that it is no rush to make any change to the massive stimulus program, a key component of Abenomics. Kuroda has made it a priority to raise inflation, but this has proven a daunting task, as inflation is still below of the BoJ’s inflation target of 2%. In this period of strong volatility in the currency markets, Kuroda’s re-election may have a calming effect on the markets. What’s next for the BoJ? With the yen continuing to rise, policymakers may contemplate further easing in order to curb the yen’s value and protect the export sector, which has improved due to stronger global demand.

USD/JPY Fundamentals

Sunday (February 18)

• 18:50 Japanese Trade Balance. Estimate 0.14T. Actual 0.37T

Monday (February 19)

• There are no Japanese or US events

Tuesday (February 20)

• 19:30 Japanese Flash Manufacturing PMI. Estimate 55.2
• 23:30 Japanese All Industries Activity. Estimate 0.5%

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 19, 2018

USD/JPY February 19 at 11:20 EST

Open: 106.30 High: 106.73 Low: 106.10 Close: 106.54

USD/JPY Technical

USD/JPY ticked higher in the Asian session. The pair was flat in European trade. In North American trade, the pair posted small gains but has retracted.

• 105.53 is providing support
• 106.64 was tested earlier in resistance and remains a weak line

Current range: 105.53 to 106.64

Further levels in both directions:

• Below: 105.53, 104.32 and 103.16
• Above: 106.64, 107.29, 108.00 and 109.11

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (75%). 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.