USD/JPY – Yen Steady at Start of Week

USD/JPY is showing marginal movement on Monday, as the pair trades at 111.60 in the European session. On the release front, it’s a quiet start to the week. In the US, today’s highlight is Factory Orders, with the markets bracing for a decline of 1.5%. In Japan, Monetary Base came in at 28.5%, which was within expectations. On Tuesday, the US will release ISM Non-manufacturing PMI, a key gauge of the strength of the services sector. The index is expected to improve to 54.1 points.

The US labor market remains robust, as underscored by Friday’s employment numbers. Nonfarm Payrolls came in at 215 thousand, above the estimate of 205 thousand. The unemployment rate edged up to 5.0%. Average Hourly Earnings posted a small gain of 0.3%, ahead of the estimate of 0.2%. Still, the positive job numbers didn’t help the US dollar, which lost 100 points against the yen on Friday.

The US dollar had a disappointing week, as USD/JPY slipped almost 200 points. The yen jumped on Janet Yellen’s very dovish comments last week at a speech in New York. Yellen warned of risks to the US economy from uncertainty in the global markets and the slowdown in China, and poured cold water on speculation of an April rate hike. With the US economy in good shape, why did Yellen sound ultra-dovish in her comments? Yellen was likely reacting to comments by several Fed members prior to her speech, which were very hawkish in tone, some going as far as calling for a rate hike this month. The contradictory messages coming out of Fed points to a split in the FOMC concerning monetary policy, although Yellen is likely to have the last word. Mixed messages out of the Fed creates uncertainty that the markets could do without, so analysts will be paying close attention to the Fed minutes on Wednesday, looking for clues as to further rate projections. Traders should be prepared for some volatility after the release of the minutes.

Japan released the Tankan Manufacturing and Non-manufacturing indices for the first quarter late last week, key indicators which are similar to PMI reports. Both indicators lost ground missed their estimates. The Tankan Manufacturing Index slipped to 6 points, its weakest reading since 2013. Analysts attributed the drop to weaker demand for Japanese exports, coupled with a sharp appreciation in the yen. Non-Manufacturing Index followed suit, as domestic spending as dipped. The index dropped to 22 points, its smallest gain in four quarters. The soft readings will undoubtedly raise concerns at the Bank of Japan, which is under pressure to make some monetary moves at its policy meeting in April in order to kick-start the weak economy.

USD/JPY Fundamentals

Sunday (April 3)

• 23:50 Japanese Monetary Base. Estimate 28.7%. Actual 28.5%

Monday (April 4)

• 14:00 US Factory Orders. Estimate -1.5%
• 14:00 US Labor Market Conditions Index

Upcoming Key Events

Tuesday (April 5)

• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.1 points

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Monday, April 4, 2016

USD/JPY April 4 at 6:50 DST

Open: 111.69 Low: 111.31 High: 111.72 Close: 111.67

USD/JPY Technical

• USD/JPY posted slight losses in the Asian session but has recovered in European trade
• There is resistance at 112.48
• 111.50 is a weak support line
• Current range: 111.50 to 112.48

Further levels in both directions:

• Below: 111.50, 109.87 and 108.37
• Above: 112.48, 113.86, 114.65 and 115.59

OANDA’s Open Positions Ratio

USD/JPY ratio showed some movement towards long positions after strong losses by USD/JPY on Friday. This was due to short positions being covered following this downward movement by the pair. Long positions command a strong majority (65%), indicative of strong trader bias towards the pair 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.