USD/JPY – Yen Slides to 8-Month Lows as US Durable Reports Sparkle

USD/JPY has recorded sharp gains on Wednesday, as the pair trades at 112.40 in the North American session. On the release front, the only Japanese indicator is Flash Manufacturing PMI. It’s a very busy day in the US. Core Durable Goods Orders rose 1.0% and Durable Goods Orders jumped 4.8%, as both indicators easily beat their estimates. UoM Consumer Sentiment climbed to 93.8, above expectations. Other indicators were not as strong. Unemployment Claims were higher than expected, at 251 thousand and New Home Sales slipped to 563 thousand, well below the forecast. Later in the day, we’ll get a look at the FOMC minutes from the November policy meeting.

It’s been up, up and away for the US dollar, which continues to run roughshod over the wobbly Japanese yen. The yen has dropped 1.2 percent on Wednesday, and USD/JPY has surged 7.4 percent since November 7, just prior to the US election. Currently, the pair is at its highest level since March, and the dollar’s impressive rally shows no signs of slowing down.

The US dollar has posted broad gains in November against most major currencies, and with a rate hike in December a near-certainty, sentiment towards the dollar should remain high. However, with a new government taking over the reins, what will happen in early 2017 is a big question mark which could translate into volatility in the markets. Trump’s election promises of more spending and less taxes have been vague and we will have to wait for the new Trump administration to unveil a detailed economic platform. The Federal Reserve is in favor of gradual rate hikes next year, but this assumes that the US economy continues to strengthen. In testimony before a congressional committee last week, Fed chair Janet Yellen acknowledged the uncertainty created by Trump’s victory and said that the Fed might have to adjust its outlook, based on the new president’s economic policies.

USD/JPY Fundamentals

Wednesday (November 23)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%. Actual 1.0%
• 8:30 US Unemployment Claims. Estimate 241K. Actual 251K
• 8:30 US Durable Goods Orders. Estimate 1.2%. Actual 4.8%
• 9:00 US HPI. Estimate 0.5%. Estimate 0.6%
• 9:45 US Flash Manufacturing PMI. Estimate 53.6. Actual 53.9
• 10:00 US New Home Sales. Estimate 591K. Actual 563K
• 10:00 US Revised UoM Consumer Sentiment. Estimate 91.6. Actual 93.8
• 10:00 US Revised UoM Inflation Expectations. Actual 2.4%
• 10:30 US Crude Oil Inventories. Estimate 0.3M
• 12:00 US Natural Gas Storage. Estimate 7B
• 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, November 23, 2016

USD/JPY November 23 at 10:20 EST

Open: 110.94 High: 112.49 Low: 110.84 Close: 112.44

USD/JPY Technical

• USD/JPY was flat in the Asian and European sessions. The pair has posted sharp gains in North American trade
• 111.45 has switched to a support role following sharp gains by USD/JPY
• 112.48 is a weak resistance line and could break in the North American session
• Current range: 111.45 to 112.48

Further levels in both directions:

• Below: 111.45, 110.68, 109.47 and 108.61
•  Above: 112.48, 113.86 and 114.13

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement in the Wednesday session. Currently, short positions have a majority (63%), indicative of trader bias towards USD/JPY reversing directions and moving lower.

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.