USD/JPY – Dollar Surges Above 106 on Trump Turmoil

USD/JPY is on a roll, as the pair has posted strong gains on Thursday, continuing the upward trend which marked the Wednesday session. Currently, USD/JPY is trading at 106.60. On the release front, Japanese Preliminary Machine Tool Orders posted another sharp decline, coming in at -8.9%. In the US, the highlight of the day is Unemployment Claims. The indicator is expected to edge up to 267 thousand. On Friday, the US will release UoM Consumer Sentiment. The indicator is expected to edge lower to 87.4 points.

Wednesday was a roller-coaster ride for USD/JPY, courtesy of the shock result in the US election. The dollar dropped 3.7% in a tumultuous Asian session, close to the 101 line. However, USD/JPY then roared back, climbing to 105.90 and ending the day with strong gains. The pair continues to rally on Thursday, with USD/JPY trading at its highest levels since mid-July. The volatility seen across equity and currency markets was triggered by the unexpected election victory of Donald Trump. Hillary Clinton was widely expected to cruise to the White House, with almost all pundits confidently predicting that Trump had no chance of winning. Trump’s election victory, which has already been labeled the most stunning win in US election history, sent shock waves across global markets to an extent not seen since the Brexit vote in June. As the dust begins to settle, it is already apparent that global markets were poorly positioned heading into the vote, overconfident that voters would reject Trump and hand Clinton a victory.

The Trump election victory also shook up the odds of a December rate hike by the Federal Reserve. The odds dropped as low as 40 percent earlier in the day, but recovered and surged to 76 percent. Currently, the odds are back at 71 percent, the same level they were at just before the election. Despite this recent volatility, it’s looking quite positive for a rate hike, which would mark the first rate move by the Fed since last December. Meanwhile, the markets will be watching to see if Fed chair Janet Yellen can work with President-elect Trump. During the election campaign, Trump harshly criticized Yellen, saying she was “too political”. If Yellen were to choose to resign, the shock waves will be sure to affect the US dollar.

Fed Hike Back On With Trump Win

USD/JPY Fundamentals

Thursday (November 10)

  • 1:00 Japanese Preliminary Machine Tool Orders. Estimate -8.9%
  • 8:30 US Unemployment Claims. Estimate 267K
  • 9:15 US FOMC Member James Bullard Speaks
  • 10:30 US Natural Gas Storage. Estimate 53B
  • 13:01 US 30-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate -81.9B
  • 18:50 Japanese PPI. Estimate -2.6%
  • 23:30 Japanese Tertiary Industry Activity. Estimate -0.2%

Friday (November 11)

  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 87.4

*All release times are EDT

*Key events are in bold

USD/JPY for Thursday, November 10, 2016

USD/JPY November 10 at 7:55 EDT

Open: 105.80 High: 106.93 Low: 104.91 Close: 106.65

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.02 104.32 105.44 106.72 107.49 108.61
  • USD/JPY posted slight losses in the Asian session but has recovered in European trade and continues to move upwards
  • 105.44 is providing support
  •  106.72 was tested earlier in resistance and is a weak line
  • Current range: 105.44 to 106.72

Further levels in both directions:

  • Below: 105.44, 104.32, 103.02 and 102.36
  •  Above: 106.72, 107.49 and 108.61

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Thursday session. Currently, long positions have a slight majority (53%), indicative of slight trader bias towards USD/JPY reversing directions and 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.

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.