USD/JPY – Yen Flirts With 104, Shrugs off Excellent Current Account

USD/JPY has edged higher on Tuesday, as the pair is trading just shy of the 104 line. On the release front, Japan’s current account surplus jumped to 1.98 trillion, easily beating the forecast of 1.58 trillion. In the US, there are no major releases on the schedule. On Wednesday, the Federal Reserve will release the minutes of its September policy meeting, in which it held rates at 0.25%. As well, FOMC members William Dudley and Esther George will speak at public engagements.

The yen continues to lose ground this week, with dovish remarks from BoJ Governor Haruhiko Kuroda the latest catalyst. Kuroda stated that the BoJ is unlikely to meet its 2 percent inflation target until 2018, rather than in 2017. Kuroda added that the BoJ had no intention of changing course, saying it would continue or even strengthen monetary easing in order to achieve its inflation target. The markets appear to be taking Kuroda’s monetary message more seriously, as the broad hint of further easing has weakened the Japanese currency. Last week, the yen pushed across the 104 line for the first time since early September and the downward trend could continue this week. The next BoJ policy meeting takes place at the end of October and the markets will be looking for hints as to whether the bank intends to remain on the sidelines.

The Federal Reserve will be back in the spotlight on Wednesday, with the release of the policy minutes of the September meeting. At the meeting, three of ten members voted in favor of an immediate rate hike, underscoring growing dissent with the Fed’s cautious monetary stance, which has resulted in zero rate hikes in 2016. The US economy is in good shape, with weak inflation levels being the main sore point. The likelihood of a December rate hike has increased to 65 percent, despite a lukewarm payrolls report for September. As we approach the December policy meeting, key economic indicators will be closely monitored for their effect on a rate move, and unexpected readings could cause strong volatility in the currency markets.

USD/JPY Fundamentals

Monday (October 10)

• 19:50 Japanese Current Account. Estimate 1.58T. Actual 1.98T

Tuesday (October 11)

• 1:00 Japanese Economy Watchers Sentiment. Estimate 45.9. Actual 44.8
• 6:00 NFIB Small Business Index. Estimate 95.2
• 10:00 US Labor Market Conditions Index
• 19:50 Japanese Core Machinery Orders. Estimate -4.4%
• 23:45 Japanese 30-year Bond Auction

*All release times are EDT

*Key events are in bold

USD/JPY for Tuesday, October 11, 2016

USD/JPY October 11 at 5:00 EDT

Open: 103.71 High: 104.07 Low: 103.65 Close: 103.88

USD/JPY Technical

• USD/JPY has shown limited movement in the Asian and European sessions
• There is weak resistance at 104.32
• 103.02 is providing support
• Current range: 103.02 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36, 101.20 and 100.55
•  Above: 104.32, 105.44 and 106.72

OANDA’s Open Positions Ratio

USD/JPY ratio is showing a small majority for long positions (52%), in the Tuesday session, indicative of slight trader bias towards USD/JPY breaking out and moving 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.