USD/JPY – Yen Subdued in Light Holiday Trade

USD/JPY is steady on Wednesday, as the pair trades just below the 107 line in the European session. On the release front, it’s a quiet day, with no major events in the US. There are no Japanese releases on the schedule, as the markets remained closed for a holiday. We’ll get a look at two key US indicators later in the day – ADP Nonfarm Employment Change and the ISM Non-Manufacturing PMI.

The Japanese yen continues to shine and broke below the 105 line on Tuesday, marking the yen’s highest level since October 2014. The yen surged last week, climbing over 500 points after the Bank of Japan surprised the markets and held off from further easing. The BoJ left unchanged its 80 trillion yen target for expanding the monetary base and the 0.1% negative rate on some bank funds held by the central bank. The BoJ also postponed its time frame for its target of 2 percent inflation until 2017. In remaining on the sidelines, the BoJ sent a strong message to the markets that it won’t be rushed into more monetary action and any further easing will be data-dependent. The BoJ remains concerned about the strengthening yen and officials have issued stern warnings that it will not tolerate currency manipulations. However, it’s unlikely that tough talk will succeed in deterring speculators, as the yen has climbed sharply in 2016 and the symbolic 100 level looms closer.

Market attention will again shift to the US labor market, starting with the release of ADP Nonfarm Payrolls on Wednesday. This will be followed by Unemployment Claims and the all-important Nonfarm Payrolls later in the week. The employment picture has been a bright spot in the US economy, as unemployment remains at very low levels and Nonfarm Payrolls have been above the 200-thousand threshold. Despite the robust labor market, however, consumer confidence and spending has not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

USD/JPY Fundamentals

• 8:15 US ADP Nonfarm Employment Change. Estimate 205K
• 8:30 US Preliminary Nonfarm Productivity. Estimate -1.3%
• 8:30 US Preliminary Unit Labor Costs. Estimate 2.9%
• 8:30 US Trade Balance. Estimate -45.6B
• 9:45 US Final Services. Estimate 52.1
• 10:00 US ISM Non-Manufacturing PMI. Estimate 54.9
• 10:00 US Factory Orders. Estimate 0.7%
• 10:30 US Crude Oil Inventories. Estimate 0.6M

Upcoming Key Events

Thursday (May 5)

• 8:30 US Unemployment Claims. Estimate 261K

*Key releases are highlighted in bold

*All release times are EDT

USD/JPY for Wednesday, May 4, 2016

USD/JPY May 4 at 4:15 EDT

Open: 106.66 Low: 106.52 High: 107.31 Close: 106.91

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session. The pair is flat in the European session
• 107.57 is a weak resistance line
• 106.19 has switched to a support role
• Current range: 106.19 to 107.57

Further levels in both directions:

• Below: 106.19, 105.18, 104.12 and 103.09
•  Above: 107.57, 108.37 and 109.87

OANDA’s Open Positions Ratio

USD/JPY ratio is showing some movement towards long positions on Wednesday. Long positions command a strong majority (71%). This is indicative of strong trader bias towards USD/JPY moving to higher ground.

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.