USD/JPY – Yen Steady as Japanese GDP Matches Estimate

The Japanese yen is showing little movement on Wednesday, continuing the lack of movement which marked the Tuesday session. USD/JPY is trading slightly above the 107 line. In economic news, Japanese Final GDP posted a gain of 0.5%, matching the forecast. Current Account dropped to JPY 1.63 trillion, well short of the estimate. In the US, today’s key event is JOLTS Jobs Openings. The employment indicator is expected to dip to 5.67 million. We’ll also get a look at Crude Oil Inventories, with the markets expecting a strong decline of 3.2 million barrels.

USD/JPY remains steady following mixed economic reports late on Tuesday. Japanese Final GDP posted a respectable gain of 0.5% in the first quarter, edging above the initial government report of a 0.4% for Q1. The GDP release is certainly good news for the government, which recently had an about-face and postponed a sales tax hike from April 2017 to October 2019. This delay is intended to help struggling households and rejuvenate sluggish consumer spending, a key component of economic activity. Still, the economy is on shaky ground, as global demand remains soft and a strong yen could hamper the struggling export sector. In other news, the adjusted account surplus narrowed to JPY 1.63 trillion, surprising the markets which had expected a stronger reading of JPY 2.04 trillion. The sharp drop marked the lowest surplus in three months.

Federal Reserve Chair Janet Yellen delivered a closely-watched speech on Monday, but the markets were disappointed with her lack of specifics, and EUR/USD showed no movement. Speaking at the World Affairs Council in Philadelphia, Yellen said she remained optimistic about the US economy and hinted that the Fed would raise interest rates, but crucially, she gave no indication as to when that might occur. This omission was in sharp contrast to her remarks just over a week ago, when she declared that a hike would likely be appropriate “in the coming months”. Yellen was cautious in her tone on Monday, saying “[i]f incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective as I expect, further gradual increases in the Federal Funds Rate are likely to be appropriate”.  Yellen played down the dismal Nonfarm Payroll report, saying that the markets shouldn’t attach too much significance to one soft report. The markets had lowered expectations for a June rate hike after the dismal NFP report on Friday, and Yellen’s speech has all but priced a rate hike at next week’s Fed policy meeting. However, a rate increase in July or September remains on the table, and any decision by the Fed to raise or maintain rates will be data-dependent, particularly on inflation and employment data.

US employment numbers continue to raise concerns. On Monday, the Labor Market Conditions Index dropped 4.9 points, marking a fourth consecutive decline. This was followed by Revised Nonfarm Productivity, which dropped 0.6%. These soft figures were not a major surprise, coming on the heels of a dismal Nonfarm Payrolls report on Friday. This event is one of the most important indicators, and a dismal April report of just 38 thousand stunned the markets. The weak figure marked the smallest increase in payrolls since August 2010. The estimate stood at 159 thousand, which was almost identical to the previous release. The shocking figure resulted in the US dollar took a beating on the currency markets on Friday.

USD/JPY Fundamentals

Tuesday (June 7)

• 19:50 Japanese Current Account. Estimate 2.04T. Actual 1.63T
• 19:50 Japanese Final GDP. Estimate 0.5%. Actual 0.5%
• 23:50 Japanese Bank Lending. Actual 2.2%
• 23:50 Japanese Final GDP Price Index. Estimate 0.9%. Actual 0.9%

Wednesday (June 8)

• 10:00 US JOLTS Job Openings. Estimate 5.67 M
• 19:30 US Crude Oil Inventories. Estimate -3.2M
• 13:01 US 10-year Bond Auction

Upcoming Key Events

Thursday (June 9)

• 8:30 US Unemployment Claims. Estimate 269K

*Key events are in bold

*All release times are EDT

USD/JPY for Wednesday, June 8, 2016

USD/JPY June 8 at 6:05 EDT

Open: 107.29 Low: 106.71  High: 107.30 Close: 107.18

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session and has been flat in European trade
• 107.16 was tested earlier in support and could break during the Wednesday session
• There is strong resistance at 108.37
• Current range: 107.16 to 108.37

Further levels in both directions:

• Below: 107.16, 105.87 and 104.99
•  Above: 108.37, 109.87 and 110.66

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing movement towards short positions on Wednesday. Long positions have a strong majority (63%), indicative of trader bias towards USD/JPY 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.