USD/JPY – Yen Remains Rangebound

USD/JPY is listless on Tuesday, as the pair trades just above the 123 line in the North American session. In economic news, it’s another quiet day, with no major Japanese or US releases. In the US, NFIB Small Business Index met expectations, while Import Prices disappointed with a fifth straight decline. In Japan, the Economy Watchers Sentiment moved higher, hitting 48.2 points. This matched the forecast.

The US dollar closed last week with strong gains at the expense of the yen, courtesy of the outstanding Nonfarm Payroll report on Friday. The key indicator surprised the markets with a surge of 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. The positive news continued on Monday, as the US Labor Market Conditions Index gained 1.6 points in October, up from a flat reading of 0.0 points a month earlier.

Given that the Federal Reserve said in its recent policy statement that it employment data would be an important factor in a rate decision, the strong NFP reading on Friday has greatly increased the likelihood of a Fed hike. The US dollar posted broad gains as a result, and the yen closed the week above the 123 line. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand an interest rate hike before voting in favor of raising rates.

China is a key trading partner for Japan, so key Chinese economic events can have a significant effect on the movement of USD/JPY. Chinese inflation dropped to 1.3% in October, short of the estimate and the lowest reading in five months. Is the Chinese slowdown getting worse? If so, the struggling yen could be headed for new lows. We’ll get a look at Chinese Industrial Production on Wednesday.

USD/JPY Fundamentals

Tuesday (Nov. 10)

• 5:00 Japanese Economy Watchers Sentiment. Estimate 48.2 points. Actual 48.2 points.
• 11:00 US NFIB Small Business Index. Estimate 96.4 points. Actual 96.1 points 
• 13:30 US Import Prices. Estimate -0.1%. Actual -0.5%
• 15:00 US Wholesale Inventories. Estimate 0.0%
• 18:01 US 10-year Bond Auction
• 19:30 US FOMC Member Charles Evans Speaks

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Tuesday, November 10, 2015

USD/JPY November 10 at 17:35 GMT

USD/JPY 123.17 H: 123.44 L: 123.05

USD/JPY Technical

• The Japanese yen has shown marginal movement throughout the day.
• 123.74 continues to provide resistance.
• 122.40 is an immediate support line.
• 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, consistent with the lack of movement shown by the pair. Long positions retain a majority of positions (55%). This is indicative of trader bias towards the pair moving to higher 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.