USD/JPY – Yen Slides on Soft Japanese Manufacturing Report

USD/JPY has gained 100 points on Friday, as the pair trades at 113.90 in the European session. On the release front, Japanese BSI Manufacturing Index posted a sharp decline of -7.9 points, well below the forecast of 4.2 points. There are no Japanese releases on Friday. In the US, today’s sole event is Import Prices.

The Japanese yen has softened on Friday, in response to a dismal manufacturing report. The BSI Manufacturing Index dropped 7.9 points in the fourth quarter, compared to an estimate of a gain of 4.2 points. This marked the indicator’s worst showing in seven months. The manufacturing sector has been hit hard by the Chinese slowdown, as China is one of Japan’s top trading partners. Japanese fundamentals continue to point to an economy in deep trouble. GDP contracted in the fourth quarter, current account surplus dropped sharply, and PPI posted an eleventh straight decline. These soft numbers have intensified pressure on the BoJ to take further monetary action at its policy meeting next week. The BoJ adopted negative interest rates in late January, but policymakers have little to show for the surprise move which shocked the markets. Inflation has not lifted, Japanese bond yields are below or close to zero, and the yen has actually gained 5 percent since the BoJ move. With this gloomy background in mind, there is every likelihood that the central bank will announce some easing measures in March or April.

It’s been an uneventful week out of the US, with no major events on the calendar. That will change next week, with retail sales, inflation indicators and consumer confidence readings. As well, the FOMC will meet for a monetary policy meeting and make a rate announcement. The US economy has softened in early 2016, but overall the economy is on stable ground. The employment market is strong, (although wage growth remains a sore spot), there is growth and consumers are optimistic. Inflation levels are very low, however, exacerbated by the collapse in oil prices. Given this economic backdrop, will the Fed raise rates next week? Most experts say no, although there is some support in the markets for another such move. More likely, the cautious team of Yellen & Co. will wait until mid-2016, and seriously consider a hike if the US economy shows that it is gaining steam.

 

USD/JPY Fundamentals

Thursday (March 10)

  • 18:50 Japanese BSI Manufacturing Index. Estimate 4.2 points. Actual -7.9 points

Friday (March 11)

  • 8:30 US Import Prices. Estimate -0.7%

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Friday, March 11, 2016

USD/JPY March 11 at 5:40 EST

Open: 112.85 Low: 112.73 High: 113.88 Close: 113.84

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.87 111.50 112.48 113.86 114.65 115.85
  • USD/JPY was choppy in the Asian session and has posted gains in European trade.
  • 113.86 is under strong pressure in resistance and could break during the day
  • 112.48 has strengthened in support following strong gains by USD/JPY
  • Current range: 112.48 to 113.86

Further levels in both directions:

  • Below: 112.48, 111.50, 109.87, and 108.37
  • Above: 113.86, 114.65, 115.85 and 116.65

OANDA’s Open Positions Ratio

USD/JPY ratio continues to show little movement. Long positions retain a strong majority (64%), indicative of strong trader bias towards the pair continuing to move to higher levels.

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.