USD/JPY – Yen Subdued, Japanese GDP Next

USD/JPY is quiet on Monday, as the pair trades at 113.50 in the European session. In the US, it’s a quiet start to the week, with two minor events – the Labor Market Conditions Index and Consumer Credit. Japan releases a host of indicators today, led by Current Account and Final GDP.

The yen posted superb gains in February and remains fairly strong, but recent Japanese fundamentals have not impressed. Retail Sales, the primary gauge of consumer spending, came in at -0.1%, marking a third straight decline. There was no relief from Household Spending, which posted a sharp drop of 3.1 percent, short of the forecast of a 2.5 percent decline. The indicator has now posted declines for five consecutive months. These weak figures point to a Japanese consumer who has tightened the purse strings and is cutting back on spending. Preliminary GDP came in at -0.4%, and the identical figure is expected from Final GDP. If this figure does drop below zero, it will indicate contraction in the economy, which will only intensify pressure on the BoJ to take further monetary action at its policy meeting later in March. At the January meeting, the BOJ adopted negative interest rates, shocking the markets and sending the yen sharply lower. If the BoJ decides to implement additional easing measures, it would likely push the yen to lower levels.

US Nonfarm Payrolls surged to 242 thousand in January, much higher than the estimate of 195 thousand. This marked an impressive jump from the previous reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Still, employment news was mixed, as wage growth declined by 0.1%, shy of the estimate of a 0.2% gain. This marked the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline underscores that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to raise rates trigger at its policy meeting later this month.

USD/JPY Fundamentals

Monday (March 7)

• 00:00 Japanese Leading Indicators. Estimate 101.6%. Actual 101.4%
• 10:00 US Labor Market Conditions Index
• 13:00 US FOMC Member Lael Brainard Speaks 
• 13:00 US FOMC Member Stanley Fischer Speaks 
• 15:00 US Consumer Credit. Estimate 16.8B 
• 18:50 Japanese Current Account. Estimate 1.66T
• 18:50 Japanese Final GDP. Estimate -0.4%
• 18:50 Japanese Bank Lending
• 18:50 Japanese Final GDP Price Index. Estimate 1.5%
• 22:45 Japanese 30-year Bond Auction

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, March 7, 2016

USD/JPY March 7 at 7:00 EST

Open: 113.82 Low: 113.40 High: 113.86 Close: 113.57

USD/JPY Technical

• USD/JPY has shown marginal movement in the Asian and European sessions
• 113.86 has switched to a resistance role. It is a weak line
• 112.48 is providing support
• Current range: 112.48 to 113.86

Further levels in both directions:

• Below: 112.48, 111.50 and 109.87
• Above: 113.86, 114.65, 115.85 and 116.65

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement, consistent with the lack of movement from USD/JPY. Long positions retain a strong majority (62%), indicative of strong trader bias towards the pair heading to higher levels.

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.