USD/JPY – Dollar Climbs Above 110 Yen on Soft Japanese GDP

USD/JPY has posted slight losses in the Thursday session. In North American trade, the pair is trading just above the 110 level. On the release front, Japanese Final GDP disappointed, as the reading of 0.3% missed the forecast of 0.6%. Japan’s current account surplus improved to JPY 1.81 trillion, well above the forecast of JPY 1.62 trillion. In the US, unemployment claims dipped to 245 thousand, higher than the estimate of 241 thousand.

It was report card day for the Japanese economy, but the results were disappointing. First quarter GDP was revised downwards to 0.3%, compared to 0.5% in the preliminary GDP report. At the same time, the economy has posted growth for five consecutive quarters – the first time that has occurred in over 10 years. Japan has benefited from a stronger global economy, notably the manufacturing and export sectors. However, domestic consumption remains sluggish, and household spending contracted 1.4% on year in April. The Bank of Japan will hold a policy meeting on June 15-16, and is expected to maintain its ultra-loose monetary stance in order to prop up inflation and domestic demand.

In Washington, the hottest ticket in town is the Senate Intelligence Committee hearing of former FBI director James Comey. On Wednesday, the committee released a written statement from Comey which discussed his meeting with President Trump. There are accusations that Trump asked Comey to close an investigation into Trump’s alleged ties with Moscow, and the committee will grill Comey on this key issue. The media is in a feeding frenzy ahead of Comey’s testimony, but it is doubtful that his testimony will be the “smoking gun” that leads to charges of obstruction of justice against President Trump. At the same time, Comey’s testimony could complicate matters for a beleaguered Trump administration, and any dramatic revelations could shake up the markets. Investors are growing more skeptical that Trump, who seems to be spending most of his time in damage control mode, will be able to deliver on key campaign planks, such as tax reform. If Trump appears even more vulnerable after Comey’s day on the stand, investors could flock to the safe-haven Japanese currency.

USD/JPY Fundamentals

Wednesday (June 7)

• 19:50 Japanese Final GDP. Estimate 0.6%. Actual 0.3%
• 19:50 Japanese Bank Lending. Estimate 3.0%. Actual 3.2%
• 19:50 Japanese Current Account. Estimate 1.62T. Actual 1.81T
• 19:50 Japanese Final GDP Price Index. Estimate -0.8%. Actual -0.8%

Thursday (June 8)

• 1:00 Japanese Economy Watchers Sentiment. Estimate 48.6. Actual 48.6
• 8:30 US Unemployment Claims. Estimate 241K. Actual 245K
• 10:00 US IBD/TIPP Economic Optimism. Estimate 51.6. Actual 51.3
• 10:30 US Natural Gas Storage. Estimate 99B
• 19:50 Japanese M2 Money Stock. Estimate 4.3%

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, June 8, 2017

USD/JPY June 8 at 11:05 EDT

Open: 109.81 High: 110.39 Low: 109.38 Close: 110.14

USD/JPY Technical

USD/JPY edged lower in the Asian session. The pair reversed directions in the European session and posted gains. USD/JPY is showing little movement in North American trade

• 109.77 was tested earlier in support
• 110.94 is the next line of resistance
• Current range: 109.77 to 110.94

Further levels in both directions:

• Below: 109.77, 108.13, 106.68 and 105.19
•  Above: 110.94, 112.57 and 113.55

OANDA’s Open Positions Ratio

USD/JPY ratio continues to show limited movement this week. Currently, long positions have a majority (63%), indicative of trader bias towards USD/JPY continuing to move to higher levels.

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.