USD/JPY – Yen Slides Continues Despite Strong Japanese GDP

USD/JPY continues to lose ground, as the pair is trading slightly below the 108 level. On the release front, Japanese Preliminary GDP climbed 0.5%, beating the forecast of 0.2%. BoJ Governor will speak at an event in Nagoya. There are no US releases on the schedule. On Tuesday, the US will release retail sales reports.

The Japanese economy gathered steam in the third quarter, as Preliminary GDP rose 0.5 percent, (on an annualized basis, the gain was an impressive 2.2 percent) This was welcome news for the BoJ, as the strong figure gives the bank some breathing room regarding further monetary easing. Still, the yen could not take advantage of the positive news and has recorded considerable losses in the Monday session.

The Japanese yen took the markets on a wild ride last week, following the stunning news that Donald Trump had won the US presidential election. 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. The dollar initially sagged after the election results, but recovered strongly. USD/JPY gained 2.2% last week and the yen continues to slide. Currently, the pair is trading at its highest level since the end of May.

As the shock of a Trump presidency begins to wear off, investors and traders are asking what will a Trump election mean for the markets. Like much of his agenda, Trump’s economic platform is unclear. According to Bank of America Merrill Lynch, given that both houses of Congress are under Republican control, we could see Trump opt to loosen fiscal policy. This would lead to greater spending, causing more inflation. In turn, interest rates would move higher and bolster the US dollar. However, Trump remains an enigma, having never held public office. His ideology is unclear (if he has one), so the markets could be in for a period of uncertainty, at least in the early stages of the Trump administration. This could lead to prolonged volatility in the currency markets. As far as monetary policy is concerned, the odds of a rate hike in December also showed some volatility immediately after the election, but have jumped to a remarkable 85 percent, as all signs point to the first hike since last December.

Dollar Keeps Rising After Trump Elected President

 

USD/JPY Fundamentals

Monday (November 14)

  • 18:50 Japanese Preliminary GDP. Estimate 0.2%. Actual 0.5%
  • 18:50 Japanese Preliminary GDP Price Index. Estimate 0.3%. Actual -0.1%
  • 20:00 BoJ Governor Haruhiko Kuroda Speech
  • 23:30 Japanese Revised Industrial Production. Estimate 0.0%. Actual 0.6%

Tuesday (November 15)

  • 8:30 US Core Retail Sales. Estimate 0.5%
  • 8:30 US Retail Sales. Estimate 0.6%

*All release times are EDT

*Key events are in bold

 

USD/JPY for Monday, November 14, 2016

USD/JPY November 14 at 8:20 EDT

Open: 106.88 High: 108.16 Low: 106.84 Close: 107.87

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
105.44 106.72 107.49 108.61 109.47 110.68
  • USD/JPY has posted gains in the Asian and European sessions
  • 107.49 has switched to a support role following strong gains by USD/JPY
  •  There is resistance at 108.61
  • Current range: 107.49 to 108.61

Further levels in both directions:

  • Below: 107.49, 106.72, 105.44 and 104.32
  •  Above: 108.61, 109.47 and 110.68

OANDA’s Open Positions Ratio

USD/JPY ratio is showing short positions with a small majority (51%) in the Monday session. This is indicative of a lack of trader bias as to what direction USD/JPY will take next.

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.