USD/JPY – Yen Rally Continues, Close to 116

The Japanese yen has posted considerable gains on Monday, as USD/JPY trades at 116.30 early in the North American session. On the release front, Japanese Current Account widened to 1.64 trillion yen, above the estimate. Japanese Economy Watchers Sentiment slipped to 46.6 points, short of expectations. In the US, today’s sole release is the Labor Market Conditions Index.

The BOJ released a summary of its last policy meeting, which shocked the markets when the BOJ adopted negative rates for the first time in its history. The summary indicated that policymakers were deeply divided over the move, which carried by a 5-4 vote. One board member expressed concern that negative rates sent the wrong message about the BOJ’s commitment to combat inflation and could result in other central banks holding off from rate hikes. Predictably, the yen dropped sharply following the announcement about negative rates, but has since rebounded. Meanwhile, Average Cash Earnings, which measure disposable income, disappointed in the November report. The indicator barely moved, posting a weak gain of 0.1%, which was short of the estimate of 0.7%. The Japanese consumer has been keeping a tight hand on the purse strings, as weak consumer spending has been having a negative impact on the economy. Wage growth remains weak, so consumers are holding back on spending.

It’s been a super February for the yen, which has jumped a remarkable 500 points against the US dollar in just one week. The Japanese currency took full advantage of weak US numbers last week, as employment and service sector numbers missed estimates. ADP Nonfarm Payrolls dropped to 205 thousand in January, much weaker than 257 thousand a month earlier. There was further weak data from ISM Non-Manufacturing PMI, a key gauge of the services sector. The index dipped to 53.2 points in January, its worst showing since March 2014. Unemployment Claims were higher than expected,  and the week wrapped up with a dismal Nonfarm Payrolls report, with a small gain of 151 thousand. The markets had expected a much stronger gain of 189 thousand. No less worrying, this figure marks a sharp drop from the previous reading of 292 thousand. These weak job numbers could mean a delay in another US rate hike until after March.

USD/JPY Fundamentals

Monday (Feb. 8)

• 00:00 Japanese Economy Watchers Sentiment. Estimate 48.5 points. Actual 46.6 points
• 10:00 US Labor Market Conditions Index
• 18:50 Japanese M2 Money Stock. Estimate 3.1%
• 22:45 Japanese 30-year Bond Auction

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Monday, February 8, 2016

USD/JPY February 8 at 8:50 EST

Open: 116.95 Low: 116.12 High: 117.52 Close: 116.38

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session. The pair recovered and posted strong losses in European trade.
• 116.88 is a weak resistance line
• 115.90 is providing support
• Current range: 115.90 to 116.88

Further levels in both directions:

• Below: 115.90, 114.65 and 113.86
• Above: 116.88, 118.53, 1119.58 and 120.40

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged, as long positions command a solid majority (73%). This 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.