USD/JPY – Yen Showing Limited Movement, US Job Report Next

The yen continues to show little movement this week, as USD/JPY trades just shy of the 118 line early in the North American session on Tuesday. On the release front, Japanese Consumer Confidence remained steady, at 42.7 points. On Monday, Japanese Current Account slipped to JPY 1.42 trillion, well below the forecast. In the US, today’s highlight is JOLTS Jobs Openings. The markets are expecting the indicator to improve to 5.41 million.

The New Year started in superb fashion for the yen, which gained close to 300 points last week. Investors snapped up the safe-haven yen throughout last week, in response to weak Chinese data and tensions in the Middle East and North Korea. In addition, a surprise devaluation of the Chinese yuan weakened minor currencies and bolstered the safe yen. These events propelled the Japanese yen to its highest levels against the greenback since August. Still, the reality of fundamentals could see the yen retract, as the Japanese economy has struggled due to decreased demand on the global and domestic fronts. The Bank of Japan remains under pressure to increase monetary easing, which would likely weaken the yen.

The US economy has entered 2016 in excellent shape, and much of the credit goes to the robust US labor market. December employment numbers have looked sharp, as Nonfarm Employment Change surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months. The unemployment rate remained unchanged at 5.0%, within the Federal Reserve’s definition of “full employment”. One area of concern in the employment picture is that of wage growth, which has not kept up with the strong improvement in payrolls. Even if technically the US is at “full employment”, there still remains slack in the labor market, meaning that employers aren’t feeling the need to raise wages. This was underscored by the Average Hourly Earnings in December, which posted a flat reading of 0.0%, short of the forecast of 0.2%. This key event is a leading indicator of consumer inflation, meaning that wages must increase before consumers will spend more, thus leading to more inflation. The minutes from the Federal Reserve’s last policy meeting indicated that inflation remains a key concern of policymakers, and inflation levels will play an important role in the timing and size of upcoming rate hikes in 2016.

USD/JPY Fundamentals

Tuesday (Jan. 12)

• 00:00 Japanese Consumer Confidence. Estimate 42.3 points. Actual 42.7 points
• 1:00 Japanese Economy Watchers Sentiment. Estimate 46.7 points. Actual 48.7 points
• 5:30 BOJ Governor Haruhiko Kuroda Speaks
• 5:30 US FOMC Member Stanley Fischer Speaks
• 6:00 US NFIB Small Business Index. Estimate 95.4 points
• 10:00 US JOLTS Job Openings. Estimate 5.41M
• 10:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points
• 21:00 US President Barack Obama Speaks

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Tuesday, January 12, 2016

USD/JPY January 12 at 13:50 GMT

Open: 117.69 High: 118.01 Low: 117.23 Close: 117.92

USD/JPY Technical

• USD/JPY posted considerable losses in the Asian session but the pair recovered these losses in European trade
• 116.88 is providing support
• There is resistance at 118.53
• Current range: 116.88 to 118.53

Further levels in both directions:

• Below: 116.88, 115.45 and 113.23
• Above: 118.53, 119.58 and 120.40

OANDA’s Open Positions Ratio

USD/JPY ratio remains unchanged on Tuesday, reflecting the lack of movement which has characterized the pair since late last week. Long positions continue to command a solid majority (65%), which is indicative of strong trader bias towards the pair continuing to move 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.