USD/JPY – Yen Surges on Trump Shocker as Markets in Turmoil

USD/JPY has posted sharp losses in the Wednesday session, as the pair trades just above the 1.03 level. The pair has taken traders on a roller-coaster ride, dropping close to the 101 line, before reversing directions and climbing up to the 103 level. The volatility is in reaction to the shocking news on Wednesday that Donald Trump has won the US presidential election. Trump garnered 276 electoral votes, beating Hillary Clinton who won 218 electoral votes. On the economic front, there are no major releases out of Japan or the US. On Thursday, the US will publish unemployment claims, with the estimate standing at 267 thousand.

Donald Trump’s upset election victory has stunned the markets and the US dollar initially responded with sharp losses. The US dollar plunged in the Asian session, as USD/JPY declined 2.4 percent. However, the dollar has bounced back in the European session, recovering a large portion of these losses. As Clinton was widely expected to cruise to the White House (a Reuters release on Monday said that Clinton had a 90 percent  chance of winning), the equity and currency markets are in turmoil as the unthinkable has become reality. Trump’s victory speech was diplomatic and conciliatory, helping the markets to start to settle down after a tumultuous Asian session.

The news of a Trump electoral victory also shook up the odds of a December rate hike by the Federal Reserve. The odds dropped as low as 40 percent earlier in the day, but have recovered and actually increased. Currently, the markets have priced in at quarter-point hike at 76 percent, up from 71 percent just prior to the election. We could see further movement in the odds in the aftermath of the Trump victory, but it’s looking quite positive for a rate hike, which would mark the first rate move by the Fed since last December.

The BoJ released its minutes from the September policy meeting on Monday. Policymakers acknowledged that it “may take time to heighten inflation expectations”, a sentiment stated recently by BoJ Governor Haruhiko Kuroda. The governor lowered expectations about reaching its inflation target of 2.0 percent, saying that this goal is unlikely to be reached prior to 2018. The BOJ’s has adopted a massive stimulus program and cut interest rates into negative territory in order to kick-start the economy and raise inflation levels. However, the program has failed on both accounts, as the economy remains weak and continues to grapple with deflation.

USD/JPY Fundamentals

Wednesday (November 9)

• 00:00 Japanese Economy Watchers Sentiment. Estimate 44.4. Actual 46.2
• 10:00 US Final Wholesale Inventories. Estimate 0.2%
• 10:30 US Crude Oil Inventories. Estimate 1.3M
• 13:01 US 10-year Bond Auction
• 18:50 BoJ Summary of Opinions
• 18:50 Japanese Core Machinery Orders. Estimate -1.8%
• 18:50 Japanese M2 Money Stock. Estimate 3.6%
• 22:45 Japanese 30-year Bond Auction

Thursday (November 10)

• 13:30 US Unemployment Claims. Estimate 267K

*All release times are EDT

*Key events are in bold

USD/JPY for Wednesday, November 9, 2016

USD/JPY November 9 at 7:00 EDT

Open: 104.97 High: 105.47 Low: 101.16 Close: 103.13

USD/JPY Technical

• USD/JPY posted sharp losses in the Asian session but has partially recovered in European trade
• 103.02 is a weak support line
•  There is resistance at 104.32
• Current range: 103.13 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36 and 101.16
•  Above: 104.32, 105.44, 106.72 and 107.49

OANDA’s Open Positions Ratio

USD/JPY ratio is showing gains in short positions. Currently, long positions have a small majority (52%), indicative of slight trader bias towards USD/JPY reversing directions and 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.