USD/JPY – Japan Posts Trade Surplus, Yen Steady

The Japanese yen is steady on Monday, as USD/JPY trades at 118.50 in the European session. On the release front, Japan posted a trade surplus in December, but missed the estimate. On Monday, Japan releases SPPI, which measures inflation in the corporate sector.

Japanese fundamentals have not kept pace with US numbers, and this divergence was underscored on Wednesday, as Japanese All Industries Activity fell 1.0% in November, missing the forecast of -0.7%. No less important, this was the indicator’s third decline in four months. The Japanese economy has been hard hit by the Chinese slowdown as well as weak domestic demand, and Japanese inflation levels remain very low. Last week, BoJ Governor Haruhiko Kuroda participated at the World Economic Forum in Davos, Switzerland. Taking a page out of ECB President Mario Draghi’s book, Kuroda said that the BoJ would step in with further monetary easing if necessary. The markets will be closely monitoring the BoJ, as additional easing steps will likely push the yen to lower levels.

US inflation numbers remain low, which has proven to be a sore spot in a generally strong US economy. This was underscored last week, as key inflation numbers missed their estimates. CPI dropped 0.1%, short of the estimate of 0.0%. Core CPI also softened, posting a gain of 0.1%. This was short of the forecast of 0.2%. Weak inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another interest rate hike would be appropriate in early 2016. Meanwhile, US jobless claims jumped to their highest level in 11 months, as the reading of 293 thousand was much worse than the estimate of 279 thousand. Will these weak numbers dampen Fed enthusiasm for a rate hike? There is speculation that the Fed could make a move in March, contingent on the strength of the US economy. A lack of inflation points to slack in the economy, and the Fed could hold off on another hike until inflation levels improve.

USD/JPY Fundamentals

Sunday (Jan. 24)

• 18:50 Japanese Trade Balance. Estimate 0.08T. Actual 0.04T

Monday (Jan. 25)

• 18:50 Japanese Services Producer Price Index. Estimate 0.2%. 

Upcoming Key Events

Tuesday (Jan. 26)

• 10:00 US CB Consumer Confidence. Estimate 96.6 points

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, January 25, 2016

USD/JPY January 25 at 8:00 EST

Open: 118.56 Low: 118.17 High: 118.85 Close: 118.47

USD/JPY Technical

• USD/JPY has showed limited movement in the Asian and European sessions
• 116.88 has strengthened in support as the pair trades at higher levels
• 118.53 was tested earlier in support and is a weak line
• Current range: 116.88 to 118.53

Further levels in both directions:

• Below: 116.88, 115.45, 113.23 and 112.48
• Above: 118.53, 119.58 and 120.40

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little change on Monday, consistent with the lack of movement from the pair.  Long positions continue to command a solid majority (61%), which is indicative of strong trader bias towards the pair 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.