USD/JPY – Yen Posts Sharp Gains, Markets Eye US Retail Sales, Consumer Confidence

The yen has rebounded with sharp gains on Friday, as USD/JPY trades at 117.40 in the European session. On the release front, it’s a very busy day in the US, with four key releases, with reports covering inflation, retail sales and consumer confidence. So we could see some volatility from USD/JPY if there are any surprises from these key indicators.

The Japanese yen has enjoyed a strong January, gaining close to 300 points against the US dollar. Investors continue to snap up the safe-haven yen in 2016, in response to the Chinese stock market meltdown and tensions in the Middle East and Korea. Will the yen continue its impressive performance?  The reality of fundamentals could see the yen retract further, as the Japanese economy has struggled due to decreased demand on the global and domestic fronts. The Bank of Japan has been reluctant to increase monetary easing, but may have to make a move early in 2016, which would likely weaken the yen.

When will the Fed strike next? The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. Many experts are forecasting another hike in March, contingent on a strong US economy. The Fed has hinted that it could raise rates up to four times in 2016, but experts like Chase Chief Economist Anthony Chan argue that is an unlikely scenario. A rate hike in late January is not considered likely, coming so soon after the December move. A move by the Fed in March is more probable, contingent of course on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.

Friday (Jan. 15)

  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US PPI. Estimate -0.2%
  • 8:30 US Retail Sales. Estimate -0.1%
  • 8:30 US Core PPI. Estimate 0.1%
  • 8:30 US Empire State Manufacturing Index. Estimate -4.1 points 
  • 9:00 US FOMC Member William Dudley Speaks
  • 9:15 US Capacity Utilization Rate. Estimate 76.8%
  • 9:15 US Industrial Production. Estimate -0.2%
  • 10:00 Preliminary UoM Consumer Sentiment. Estimate 92.7 points
  • 10:00 US Business Inventories. Estimate 0.0%
  • 10:00 US Preliminary UoM Inflation Expectations

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Friday, January 15, 2016

USD/JPY January 15 at 7:15 EST

Open: 118.22 Low: 117.23 High: 118.26 Close: 117.36

USD/JPY Technical

S3 S2 S1 R1 R2 R3
113.23 115.45 116.88 118.53 119.58 120.40
  • USD/JPY has posted losses in the Asian and European sessions
  • 116.88 has weakened in support following sharp losses by the yen
  • 118.53 is the next resistance line
  • 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. Long positions continue to command a solid majority (66%), which is indicative of strong trader bias towards the pair reversing directions 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.

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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.