USD/JPY – Yen Steady Ahead of BOJ Statement

USD/JPY has weakened on Thursday, as the pair trades at 122.70 in the North American session. The markets have returned their focus to economic events after the Federal Reserve raised interest rates by 0.25%. In the US, Unemployment Claims dropped to 271 thousand, while the Philly Fed Manufacturing Index looked awful, with a reading of -5.9 points. There are no Japanese releases on Thursday, but the Bank of Japan will release its monthly monetary policy statement early Friday.

After months of speculation and anticipation, the US Federal Reserve raised interest rates by 0.25% at its policy meeting on Wednesday. This marked the first rate move upwards since June of 2006. The Fed had been sending a steady of stream of hints that it was intending to tighten monetary policy since the last policy meeting in late October. This gave the markets ample time to price in a rate hike, and most of the major currencies did not show much reaction to the Fed rate hike. One glaring exception was the Japanese yen, which lost about 80 points against the greenback on Wednesday. The US dollar has been on a roll, gaining almost 200 points against the yen over the past week.

The slight tightening move by the Federal Reserve is expected to have limited economic impact, but the psychological aspect cannot be overestimated, as the Fed has given the US economy a critical vote of confidence, and has signaled that additional rates are likely over the course of 2016. The carefully-crafted Fed strategy, which made sure that the markets were well-aware that a December hike was a likely scenario, contrasts sharply with the bungled approach of the ECB, which failed to communicate properly with the markets, which led to complete shock in the markets when the ECB failed to take any significant monetary steps at its December policy meeting, resulting in a sharp ascent by the euro.

There was positive employment news out of the US on Thursday, as Unemployment Claims fell to 271 thousand last week, down from 282 thousand. The US labor market has improved nicely, as the economy is close to full employment, with jobless claims and the unemployment rate at low levels. This is a major reason that the Federal Reserve felt comfortable tightening monetary policy and raising interest rates at the present time. Meanwhile, the US manufacturing sector continues to struggle, as the Philly Fed Manufacturing Index came in at -5.9 points, its third decline in four months.

USD/JPY Fundamentals

Thursday (Dec. 17)

• 13:30 US Philly Fed Manufacturing Index. Estimate 2.1 points. Actual -5.9 points
• 13:30 US Unemployment Claims. Estimate 271K. Actual 271K
• 13:30 US Current Account. Estimate -123B. Actual -124B
• 15:00 US CB Leading Index. Estimate 0.2%. Actual 0.4%
• 15:30 US Natural Gas Storage. Estimate -58B. Actual -34B

Upcoming Key Events

Friday (Dec. 18)

• Tentative – BOJ Monetary Policy Statement
• Tentative – BOJ Press Conference

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Thursday, December 17, 2015

USD/JPY December 17 at 17:10 GMT

USD/JPY 122.72 H: 123.71 L: 122.22

USD/JPY Technical

• USD/JPY was steady in the Asian and European sessions. The pair has posted slight losses in the North American trade.
• 123.74 is a strong resistance line.
• 122.40 was tested earlier in support and is under strong pressure.
• 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 showing a commanding majority for long positions (64%), which is indicative of strong trader bias towards the pair 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.