USD/JPY – Yen Continues to Rally, Fed Announcement Looms

USD/JPY has posted losses in the Wednesday session, continuing the downward trend which marked the Tuesday session. The yen has rallied, gaining 1.4 percent since Wednesday. In economic news, we’ll get at a look at ADP Nonfarm Employment, with an estimate of 166 thousand. The FOMC will conclude its policy meeting and is expected to maintain the benchmark interest rate at 0.25 percent. In Japan, Consumer Confidence remained weak, coming in at 42.3 points. On Thursday, the US releases unemployment claims and the ISM Non-manufacturing PMI.

The Japanese consumer remains in a surly mood, continuing to hold tightly on the purse strings in tough economic times. Consumer Confidence continues to post soft readings. The indicator dipped to 42.3 points in October, short of the estimate of 42.8 points. Retail Sales continue to contract, as the September reading of -1.9% was only slightly better than the August report of -2.1%. The indicator has managed only one gain in 2016. There were no surprises from the BoJ on Tuesday, which remained on the sidelines and made no changes to its monetary policy. The bank maintained interest rates at -0.10% and also lowered its inflation forecast for 2017, from 1.7 percent to 1.5 percent. In its policy statement, the bank said that with regard to risk balance, risks to both economic activity and prices are skewed to the downside” and expects the export sector to remain “sluggish”.

In the US, all eyes are on the Federal Reserve, which concludes a 2-day policy meeting on Wednesday. The markets are expecting the Fed to remain on the sidelines, given there is less than a week before the US presidential election. The rate statement will be carefully monitored, as analysts comb for hints about the extent of support among FOMC members ahead of the crucial December meeting. There was positive news from the US consumer front on Monday, as Personal Spending rebounded with a 0.5% gain in September, after a flat reading of 0.0% in August. Gold responded to the reading with slight losses. This release comes on the heels of a disappointing consumer spending report on Friday, as UoM Consumer Sentiment fell to 87.2 points in October, below expectations and dropping to its lowest level since August 2015.

USD/JPY Fundamentals

Wednesday (November 2)

• 1:00 Japanese Consumer Confidence. Estimate 42.8. Actual 42.3
• 8:15 US ADP Nonfarm Employment Change. Estimate 166K
• 10:30 US Crude Oil Inventories. Estimate 1.6M
• 14:00 US FOMC Statement
• 14:00 US FOMC Federal Funds Rate. Estimate <0.50%. Actual <0.50%

Thursday (November 3)

• 8:30 US Unemployment Claims
• 8:30 US ISM Non-manufacturing PMI. Estimate 56.2 points

*All release times are EDT

*Key events are in bold

USD/JPY for Wednesday, November 2, 2016

USD/JPY November 2 at 7:55 EDT

Open: 104.08 High: 104.16 Low: 103.20 Close: 103.26

USD/JPY Technical

• USD/JPY posted losses in the Asian session and continues to lose ground in European trade
• 103.02 is under pressure in support as USD/JPY is moving lower
• There is resistance at 104.32
• Current range: 103.02 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36 and 101.20
•  Above: 104.32, 105.44, 106.72 and 107.49

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (54%), indicative of slight trader bias towards USD/JPY reversing directions and climbing 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.