USD/JPY – Yen Surges Higher, BoJ Minutes Next

USD/JPY continues to lose ground on Thursday, as the pair trades at 111.50 in the North American session. On the release front, US indicators were mixed. The Philly Fed Manufacturing Index jumped 12.4 points, crushing the estimate of -1.4 points. Unemployment Claims rose to 265 thousand, within expectations. Later in the day, the Bank of Japan will release the minutes of its last monetary policy meeting.

With the Japanese economy struggling, pressure has been building on the BoJ to adopt further easing steps. However, the central bank did not make any changes to monetary policy on Tuesday, but sounded pessimistic about the economy and warned that weak inflation will continue. The BoJ maintained its aggressive base money target of JPY 80 trillion and a 0.1 percent negative interest rate on some reserves held by the central bank. BoJ Governor Haruhiko Kuroda noted that exports and output are down due to slowing growth in emerging economies. Many experts are of the opinion that the BoJ has run out of any significant monetary easing bullets, after recently adopting negative interest rates. The yen usually loses ground when further easing steps are announced, so if the BoJ has indeed run out of options, the yen could continue to gain ground against the dollar. The Japanese currency has taken advantage of a broadly-lower greenback following the dovish Fed policy statement.

As widely expected, the Federal Reserve remained on the sidelines and did not raise interest rates at its policy meeting on Wednesday, maintaining the benchmark rate at 0.25%. The Fed statement noted that the US economy remains vulnerable to an uncertain global economy, but expects to raise rates later in the year due to moderate growth and “strong job gains”. The statement was dovish in tone, a clear departure from the December meeting, when the Fed raised rates for the first time in nine years and talked about four rate hikes over the course of 2016. In just a short three months, global demand has weakened, precipitated by the Chinese slowdown, and US numbers have cooled in comparison to the economy’s torrid pace in the second half of 2015. If inflation and employment numbers push higher in next several months, a rate hike in mid-2016 seems a good bet.

USD/JPY Fundamentals

Thursday (March 17)

• 2:30 BoJ Governor Haruhiko Kuroda Speaks
• 8:30 US Philly Fed Manufacturing Index. Estimate -1.4. Actual +12.4 points
• 8:30 US Unemployment Claims. Estimate 267K. Actual 265K
• 8:30 US Current Account. Estimate -117B. Actual -125B
• 10:00 US JOLTS Job Openings. Estimate 5.57M. Actual 5.54M
• 10:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%
• 10:30 US Natural Gas Storage. Estimate -9B 
• 19:50 BoJ Monetary Policy Meeting Minutes

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Thursday, March 17, 2016

USD/JPY March 17 at 10:35 DST

Open: 112.79 Low: 110.66 High: 112.96 Close: 111.51

USD/JPY Technical

• USD/JPY has posted slight losses in the Asian and European sessions
• There is resistance at 112.48
• 111.50 was tested earlier in support and remains under strong pressure. It could break in the North American session
• Current range: 111.50 to 112.48

Further levels in both directions:

• Below: 111.50, 109.87, and 108.37
• Above: 112,48, 113.86, 114.65 and 115.85

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged, despite strong losses by USD/JPY. Long positions command a strong majority (67%), indicative of strong trader bias towards the pair reversing directions and moving 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.