USD/JPY – BoJ Stays on Sidelines, Yen Strengthens

USD/JPY has posted strong gains on Tuesday, trading just above the 113 line in the European session. On the release front, the Bank of Japan maintained its monetary policy, but presented a bleak assessment of the economy. In the US, we’ll get a look at Retail Sales and PPI. The markets are braced for slight declines from these key indicators. On Wednesday, the FOMC will set interest rates and release a monetary policy statement.

The BoJ did not make any changes to monetary policy on Tuesday, but sounded pessimistic about the economy and warned that weak inflation will continue. The BoJ maintained its aggressive base money target of JPY 80 trillion and a 0.1 percent negative interest rate on some reserves held by the central bank. BoJ Governor Haruhiko Kuroda noted that exports and output are down due to slowing growth in emerging economies. The BoJ surprised the markets in December when it adopted negative rates, but the markets and the public have soured on the move, which has failed to lift inflation or weaken the Japanese currency. Further easing steps will likely be revisited in April, with many experts expecting the BoJ to expand monetary stimulus next month.

All eyes will be on the Federal Reserve on Wednesday, as the Fed concludes a two-day policy meeting. Most experts are expecting the Fed to remain on the sidelines and not raise rates, given current economic conditions. Although the US economy continues to expand, growth has been softer in 2016 compared to the red-hot pace which marked the economy in the second half of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. Fed policymakers are divided on how to respond to persistently low inflation. Some FOMC members favor preempting inflation with a rate hike, while others feel that the economy is currently too fragile for such a move. The Fed will likely maintain its tightening bias and continue to monitor key economic indicators. If the US economy shows strength in the first half of 2016, a rate hike is a strong possibility in the middle of the year.

USD/JPY Fundamentals

Monday (March 14)

  • 23:35- BoJ Monetary Policy Statement

Tuesday (March 15)

  • 00:30 Japanese Revised Industrial Production. Estimate 3.7%. Actual 3.7%
  • 00:30 Japanese Tertiary Industry Activity. Estimate 0.4%. Actual 1.5%
  • 2:32 BoJ Press Conference
  • 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 -10.3 points

Upcoming Key Events

Wednesday (March 16)

  • 8:30 US Building Permits. Estimate 1.20M
  • 8:30 US Core CPI. Estimate 0.2%
  • 14:00 FOMC Economic Projections
  • 14:00 FOMC Statement
  • 14:00 FOMC Federal Funds Rate
  • 14:30 FOMC Press Conference

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Tuesday, March 15, 2016

USD/JPY March 15 at 7:25 EST

Open: 113.83 Low: 112.90 High: 114.13 Close: 113.04

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.87 111.50 112.48 113.86 114.65 115.85
  • USD/JPY has posted losses in the Asian and European sessions
  • 113.86 has some breathing room in resistance as the pair trades at lower levels
  • 112.48 is providing support
  • 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 is unchanged. Long positions retain a strong majority (60%), indicative of strong trader bias towards the pair reversing directions and moving 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.