USD/JPY – Yen Subdued, Markets Await US Nonfarm Payrolls

The Japanese yen is trading sideways in the Thursday session and continues to have a quiet week. In North American trade, USD/JPY is trading at 109.28, up 0.08% on the day. On the release front, Japanese Final Manufacturing PMI improved to 54.8, above the estimate of 54.4 points. In the US, key indicators were mixed. Unemployment claims dipped to 230 thousand, below the forecast of 237 thousand. ISM Manufacturing PMI slowed to 59.1, but still beat the estimate of 58.7 points. On Friday, the spotlight will be on employment numbers, with the release of wage growth, nonfarm payrolls and the unemployment rate. As well, the US will release UoM Consumer Sentiment.

There were no major surprises from the Federal Reserve policy meeting, the final one under Janet Yellen’s watch. In the rate statement, policymakers said that they expected the economy to continue to expand at a moderate pace and that the labor market would remain strong in 2018. What caught investor’s attention was that the Fed forecast that inflation would rise this year to the Fed’s target of 2 percent. This marks an upgrade in the inflation forecast, as the December statement said that inflation was expected to “remain somewhat below 2 percent.” Higher inflation is likely to open the door to tighter monetary policy, and the Fed appears on track for three or even four rate hikes in 2018, assuming that the US economy remains strong. This policy meeting was the last under Janet Yellen, as Jerome Powell will take over as Fed chair on February 3. The slightly hawkish tone of the rate statement has raised the odds of a rate hike to 83% when the Fed next meets in March.

The Bank of Japan has continually said that it has no plans to end its massive stimulus program, but may have sent its most direct message (warning?) on Wednesday. The Bank increased its purchases of 3-5 year government bonds (JGB), while at the same time senior members were on the offensive. BoJ Governor Haruhiko Kuroda and Deputy Governor Kikuo Iwata said that the Bank would maintain “powerful” easing as long as inflation was well of the BoJ target of 2 percent. Iwata stressed that the BoJ had no plans to change its yield target levels “for the time being”. Under current yield curve policy, short-term interest rates are at -0.10% and 10-year government bonds are at 0.0%. The Japanese economy has heated up, raising speculation that the Bank could taper its stimulus program and even raise interest rates. However, the BoJ appears determined to hold the course until inflation moves higher.

USD/JPY Fundamentals

Wednesday (January 31)

• 19:30 Japanese Final Manufacturing PMI. Estimate 54.4. Actual 54.8
• 22:45 Japanese 10-y Bond Auction. Actual 0.9%

Thursday (February 1)

• 7:30 US Challenger Job Cuts. Actual -2.8%
• 8:30 US Preliminary Nonfarm Productivity. Estimate +0.8%. Actual -0.1%
• 8:30 US Preliminary Unit Labor Costs. Estimate 0.9%. Actual 2.0%
• 8:30 US Unemployment Claims. Estimate 237K. Actual 230K
• 9:45 US Final Manufacturing PMI. Estimate 55.5. Actual 55.5
• 10:00 US ISM Manufacturing PMI. Estimate 58.7. Actual 59.1
• 10:00 US Construction Spending. Estimate 0.4%. Actual 0.7%
• 10:00 US ISM Manufacturing Prices. Estimate 68.3. Actual 72.7
• 10:30 US Natural Gas Storage. Estimate -102B. Actual -99B
• All Day – US Total Vehicle Sales. Estimate 17.2M
• 18:50 Japanese Monetary Base. Estimate 11.0%

Friday (February 2)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K
• 8:30 US Unemployment Rate. Estimate 4.1%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.0

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, February 1, 2018

USD/JPY February 1 at 11:00 EDT

Open: 109.18 High: 109.75 Low: 109.10 Close: 109.28

USD/JPY Technical

USD/JPY ticked higher in the Asian session. In European trade, the pair posted gains but then retracted. USD/JPY is steady in the North American session

• 109.11 is fluid. Currently, it is a weak support line
• 110.10 is the next resistance line

Current range: 109.11 to 110.10

Further levels in both directions:

• Below: 109.11, 108.21, 107.29 and 106.14
• Above: 110.10, 111.53 and 112.57

OANDA’s Open Positions Ratios

USD/JPY is unchanged in the Thursday session. Currently, long positions have a majority (68%), indicative of trader bias towards USD/JPY 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.