USD/JPY – Dollar Pushes Above 117

USD/JPY has started the new trading week with gains, as the pair trades at 117.40 in the Monday European session. On the release front, Japanese manufacturing releases were dismal, as both Revised Industrial Production and Tertiary Industry Activity posted declines. In the US, there are no releases on the schedule, as the markets are closed for Martin Luther King Day.

The Japanese yen posted sharp gains at the end of last week, climbing some 150 points against the dollar. USD./JPY dropped all the way to 116.50, its lowest level since August 2015. The yen took full advantage of mostly downbeat US economic reports. Core Retail Sales and Retail Sales both posted declines of 0.1%, pointing to weakness in consumer spending, a key driver of economic growth. At the same time, consumer confidence remains at high levels, as the UoM Consumer Sentiment jumped to 93.3 points, beating the estimate and posting a six-month high as well. Inflation levels, one of the sore points in a generally bright economic picture, continue to struggle. PPI, which measures inflation in the manufacturing sector, came in at -0.2%, matching expectations. Still, this marked the third decline in four months, and persistently weak inflation could delay the next Fed rate hike. There was more bad news from the manufacturing front, another trouble spot in the economy. The Empire State Manufacturing Index plunged to -19.4 points, compared to an estimate of -4.1 points.

Will the Federal Reserve make another move? The Fed 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. 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.

USD/JPY Fundamentals

Sunday (Jan. 17)

  • 23:30 Japanese Revised Industrial Production. Estimate +1.4%. Actual -0.9%
  • 23:30 Japanese Tertiary Industry Activity. Estimate -0.6%. Actual -0.8%

Monday (Jan. 18)

  • There are no scheduled Japanese or US releases

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, January 18, 2016

USD/JPY January 18 at 7:15 EST

Open: 117.00 Low: 116.92 High: 117.44 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 posted gains in the Asian session and leveled off in European trade
  • 116.88 is providing weak support
  • 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 is showing little change. Long positions continue to command a solid majority (64%), 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.

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.