USD/JPY – Yen in Holding Pattern Ahead of BOJ Statement, FOMC Minutes

USD/JPY is showing little movement on Wednesday, as the pair trades at 123.60 in the North American session. The yen slump continues, as the pair trades close to 3-month lows. In economic news, Japanese Trade Balance will be released later on Wednesday. Over in the US, Building Permits improved to 1.15 million, matching the forecast. The shift now focuses to the Federal Reserve, which releases the minutes of its October policy meeting later in the day. The minutes could provide the markets with some insight as to Fed policymakers’ views regarding a rate move in December. On Thursday, the BOJ releases its Monetary Policy Statement. There are two key events out of the US – Unemployment Claims and the Philly Fed Manufacturing Index.

Will the Fed press the rate trigger at its December meeting? The guessing game continues as to whether the Federal Reserve will kick off a series of rate hikes in December, so the markets will be carefully combing through the Fed minutes, which will be released later on Wednesday. Market expectations have risen to 66% that the Fed will make a move next month. The last time the Fed raised interest rates was in June 2006, so such a dramatic move is sure to have a significant effect on the global currency markets. With the US economy close to full employment and many economic indicators pointing upwards, one of the last pieces in the puzzle is inflation. Last week’s PPI was awful, posting a second straight decline. On Tuesday, CPI and Core CPI posted small gains of 0.2%, matching the forecast. Are these lukewarm readings enough to convince the Fed to make a move in December? The Fed has said that inflation levels are an important factor in determining its decision in December, but with US inflation stuck at low levels, it remains a guessing game as to whether the Fed will press the rate trigger at its next policy meeting.

The US economy has certainly improved, but the manufacturing sector continues to lag behind. Earlier this week, the Empire State Manufacturing Index posted its fourth straight decline, underlining worsening conditions in the manufacturing sector. In November, the indicator came in at -10.7 points, weaker than the forecast of -5.3 points. On Thursday, we’ll get another look at manufacturing data, with the release of the Philly Fed Manufacturing Index. This indicator has also struggled, posting two straight declines. The markets are expecting some improvement in the November report, with an estimate of 0.1 points.

The Japanese economy continues to struggle, and this was underlined by the weak Japanese Preliminary GDP report earlier in the week. GDP dropped by an annualized 0.8 percent in the third quarter. This was a second straight contraction for GDP, which means that technically the economy is in a recession. The weak reading was much worse than expected, as the estimate stood at -0.2%. There are both domestic and global factors which are responsible for the Japanese economy’s poor performance. Consumer and business spending are down, inflation is anemic, and weaker global demand, especially from China, continues to hamper economic growth. Attention will now shift to the BOJ, which releases a monetary policy statement on Thursday. Will the BOJ change monetary policy? Many analysts are calling for the BOJ to act now, but recent statements from BOJ policymakers have sounded surprisingly optimistic, so the BOJ may opt to take the easy route and announce an economic package rather than implement new stimulus measures. Still, the BOJ will be under increasing pressure to act after the dismal GDP report, and this could weigh on the yen during the week.

USD/JPY Fundamentals

Wednesday (Nov. 18)

  • 13:00 US FOMC Member William Dudley Speaks
  • 13:30 US Building Permits. Estimate 1.15M. Actual 1.15M
  • 13:30 US Housing Starts. Estimate 1.16M. Actual 1.06M
  • 15:30 US Crude Oil Inventories. Estimate 2.0M.
  • 19:00 US FOMC Meeting Minutes
  • Tentative – BOJ Monetary Policy Statement

Upcoming Key Events

Thursday (Nov. 19)

  • 13:30 US Unemployment Claims. Estimate 272K
  • 15:00 US Philly Fed Manufacturing Index. Estimate 0.1 points

*Key releases are highlighted in bold

*All release times are GMT


USD/JPY for Wednesday, November 18, 2015

USD/JPY November 18 at 16:25 GMT

USD/JPY 123.56 H: 123.61 L: 123.21


USD/JPY Technical

S3 S2 S1 R1 R2 R3
120.40 121.50 122.40 123.74 125.63 126.84
  • The Japanese yen posted slight losses in the Asian session. USD/JPY recovered in the European session and has posted slight gains in North American trade.
  • 123.74 remains a weak resistance line and could break in the North American session.
  • 122.40 has strengthened in support, with USD/JPY moving to higher levels.
  • Current range: 122.40 to 123.74

Further levels in both directions:

  • Below: 122.40, 121.50, 120.40 and 118.53
  • Above: 123.74, 125.63 and 126.84


OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Wednesday, reflective of the limited movement shown by the pair. Long positions retain a slight majority of positions (55%), which is indicative of slight trader bias towards the pair continuing to move 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.