USD/JPY – Yen Kicks Off Week With Losses

The Japanese yen has started the week with losses against the US dollar. Early in Monday’s North American session, the pair is trading in the mid-118 range. On Sunday, the Japanese trade deficit narrowed to JPY -0.71 trillion, within expectations. As well, the BOJ released the minutes of its monetary policy. Monday’s sole Japanese event is the Services Producer Price Index. There are no US releases on Monday.

The Japanese trade deficit narrowed sharply in December, but this failed to prevent the yen from losing ground on Monday. The deficit dropped to JPY 0.71 trillion, slightly below the estimate of 0.74 trillion, and its lowest reading since June 2013. Later in the day, Japan will release the Services Producer Price Index, an important gauge of inflation in the corporate sector. The markets are expecting a strong gain of 3.6%, unchanged from the previous reading.

As expected, last week the BOJ maintained its stimulus program and stated in its policy statement that it would increase base money at a pace of JPY 80 trillion each year. This gave a boost to the yen, as many market players were expecting additional stimulus from the BOJ, given the weak economy and lack of inflation. With oil prices continuing to drop, the BOJ may be forced to reconsider further stimulus in order to avoid a recurrence of deflation, which hobbled the Japanese economy for years.

USD/JPY for Monday, January 26, 2015

USD/JPY January 26 at 14:25 GMT

USD/JPY 118.45 H: 118.48 L: 117.37

USD/JPY Technical

• USD/JPY posted gains strong gains late in the Asian session, easily breaking above resistance at 117.49. The pair edged higher in European trade.
• 118.69 is under pressure and could break in the North American session. 119.83 is stronger.
• 117.64 has reverted to a support level as the dollar has posted strong gains. This is a strong line.
• Current range: 117.49 to 118.69

Further levels in both directions:

• Below: 117.49, 116.69, 115.56, 113.64 and 112.41
• Above: 118.69, 119.83, 120.63 and 121.69

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Monday, continuing the direction which marked the ratio for most of last week. This is consistent with the pair’s movement, as the yen has posted strong losses. The ratio currently has a majority of long positions, indicative of trader bias towards the US dollar continuing to move to higher ground.

USD/JPY Fundamentals

• 23:50 Japanese Services Producer Price Index. Estimate 3.6%.

*Key releases are highlighted in bold

*All release times are GMT

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