USD/JPY – Dollar Slips Below 102 Yen in Holiday Trade

USD/JPY has posted losses on Monday, as the pair trades slightly below the 102 level. It’s a quiet start to the week, with Japanese markets closed for a public holiday. In the US, there is just one minor event, the NAHB Housing Market Index. On Tuesday, the US will release Building Permits, a key event.

The spotlight will be on central banks this week, as the Bank of Japan will set interest rates and release a policy statement late Tuesday, with the Federal Reserve following suit on Wednesday. The Bank of Japan embarked on an aggressive quantitative and qualitative easing scheme back in April 2013, with high hopes of kick-starting the economy and raising inflation levels. Fast forward over three years later, and the results have been very disappointing. Inflation is closer to zero than the bank’s target of 2% and economic growth has sputtered. The BoJ has been reluctant to take action, but with the economy sputtering and inflation well below the bank’s 2% target, the bank may decide to adopt further easing measures. The BoJ will also conduct a “comprehensive review” of its monetary policy at the meeting, which could result in some volatility from USD/JPY.

US releases ended the week on a positive note, as August consumer inflation was a bit better than expected. CPI posted a gain of 0.2%, edging above the forecast of 0.1%. It was a similar story with Core CPI, which rose 0.3%, compared to the forecast of 0.2%. CPI was up from 0.0% in July, with the rise being attributed to higher shelter and health care costs. If inflation indicators continue to rise, there is a greater chance of a rate hike in December, and increased speculation about a Fed hike could push the greenback to higher levels. The Federal Reserve will hold a policy meeting on September 21, and a rate hike is considered extremely unlikely, with a hike priced in at just 12 percent.

Ever since an upbeat speech from Janet Yellen in August, the markets have been speculating about the timing of the next Fed rate hike. However, recent economic numbers have been mixed, so the Fed is expected to remain on the sidelines on Wednesday, when it sets the benchmark rate. However, the Fed statement will be of intense interest, and the markets will be looking for clues regarding a December move. If Janet Yellen delivers a dovish message, the market’s mood could sour and the dollar could lose ground. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. Will the rate picture clear up or remain fuzzy after the rate statement?

USD/JPY Fundamentals

Monday (September 19)

  • 14:00 US NAHB Housing Market Index. Estimate 60 points

Tuesday (September 20)

  • 12:30 US Building Permits. Estimate 1.17M

*All release times are EDT

*Key events are in bold

USD/JPY for Monday, September 19, 2016

USD/JPY September 19 at 7:50 EDT

Open: 102.32 High: 102.37 Low: 101.69 Close: 101.87

USD/JPY Technical

S3 S2 S1 R1 R2 R3
99.71 100.55 101.20 102.36 103.73 104.99
  • USD/JPY has been on a downward trend, posting slight losses in the Asian and European sessions
  • 101.20 is providing support
  • 102.36 was tested earlier in resistance and could see further action in the Monday session
  • Current range: 101.20 to 102.36

Further levels in both directions:

  • Below: 101.20, 100.55, 99.71
  •  Above: 102.36, 103.73, 104.99 and 106.38

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Monday. Currently, long positions have a substantial majority (64%), indicative of trader bias towards USD/JPY 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.

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.