USD/JPY – Yen Posts Gain on Fed Uncertainty

USD/JPY has posted gains for a second straight day. In the Thursday session, the pair is trading at 116.60. On the economic front, the sole Japanese release is Average Cash Earnings, which is expected to edge up to 0.2%. In the US, ADP Nonfarm Employment Change is expected to drop to 171 thousand. The estimate for ISM Non-Manufacturing PMI is 56.6 points. The release of the Fed minutes sent USD/JPY as low as 115.55, the pair’s lowest level since December 14.

All eyes were on the Federal Reserve on Wednesday, which released the minutes of its December meeting. At the meeting, the Fed raised rates by a quarter point for the only time in 2016. The minutes indicated that FOMC members are concerned about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”. This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the US hasn’t had to deal with for years. Still, policymakers appear unchanged in their view that gradual rate hikes remains an appropriate monetary policy. The Fed members acknowledged that there is “considerable uncertainty” regarding future fiscal and economic programs. Many analysts are predicting another rate hike in June, but this could of course change, depending on how the effect that Trump’s economic platform has on the US economy. The Fed will need at least a few months to digest the economic stance of the incoming administration, and the uncertainty mentioned in the Fed minutes could lead to volatility in the markets in what promises to be an interesting first quarter of 2017.

Thursday (January 5)

• 7:30 US Challenger Job Cuts
• 8:15 US ADP Nonfarm Employment Change. Estimate 171K
• 8:30 US Unemployment Claims. Estimate 262K
• 9:45 US Final Services PMI. Estimate 53.4
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.6
• 10:30 US Natural Gas Storage. Estimate -97B
• 11:00 US Crude Oil Inventories. Estimate -1.8M
• 19:00 Japanese Average Cash Earnings. Estimate 0.2%

Friday (January 6)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 175K
• 8:30 US Unemployment Change. Estimate 4.7%

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, January 5, 2017

USD/JPY January 5 at 7:00 EST

Open: 117.14 High: 117.14 Low: 115.55 Close: 116.60

USD/JPY Technical

• USD/JPY was flat in the Asian session. In European trade, the pair dropped sharply but has recovered much of these losses
• 115.88 is providing support
• 116.88 was tested earlier in resistance and is a weak line
• Current range: 115.88 to 116.88

Further levels in both directions:

• Below: 115.88, 114.83 and 113.80
•  Above: 116.88, 118.05, 118.85 and 119.83

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in short positions. Currently, short positions have a majority (53%), indicative of slight trader bias towards USD/JPY continuing to move to lower ground.

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.