USD/JPY – Yen Hugs 109, US Inflation Report Next

USD/JPY has ticked higher on Thursday, as the pair trades at the 109 line. On the release front, there are a host of major events, highlighted by CPI and unemployment claims. Fed chair Janet Yellen will testify about the economy before the Congressional Joint Economic Committee. There are no Japanese events for the remainder of the week.

The Japanese currency is spiraling downwards and USD/JPY could soon cross above the symbolic 110 level. The pair has jumped 4.6 percent since November 7. The BoJ is clearly encouraged by the falling yen, which is good news for Japan’s export sector and could boost inflation towards the bank’s target of 2.0 percent. The bank held interest rates at -0.10% at the last policy meeting and is not expected to make any monetary moves in December, despite a weak economy gripped by deflation.

Donald Trump’s election victory was a huge upset which caused turmoil across global markets. The shock has started to subside, and market sentiment is currently very favorable towards the dollar, which is on a roll against most major currencies. A Trump presidency, bolstered by a Republican-controlled Congress) could signal a looser fiscal policy and significant tax cuts. If this scenario materializes, inflation would likely climb, leading to higher interest rates and hence a stronger dollar. At the same time, Trump remains an enigma – aside from being “pro-business”, his political and economic agendas are unclear. This lack of certainty means the markets could be in for plenty of surprises with Trump in office, which could translate into volatility in the currency markets.

With the Federal Reserve meeting for a policy meeting in December, expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we’ll see a rate hike before the end of 2016.

Fed Hike Odds Near 100%

USD/JPY Fundamentals

Thursday (November 17)

  • 8:30 US Building Permits. Estimate 1.19M
  • 8:30 US CPI. Estimate 0.4%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
  • 8:30 US Unemployment Claims. Estimate 257K
  • 8:30 US Housing Starts. Estimate 1.16M
  • 8:50 US FOMC Member William Dudley Speech
  • 10:00 US Fed Chair Janet Yellen Testifies
  • 10:30 US Natural Gas Storage. Estimate 34B
  • 12:30 US FOMC Member Lael Brainard Speech

*All release times are EST

*Key events are in bold

USD/JPY for Thursday, November 17, 2016

USD/JPY November 17 at 6:50 EST

Open: 108.78 High: 109.45 Low: 108.45 Close: 108.96

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.72 107.49 108.61 109.47 110.68 11145
  • USD/JPY posted slight gains in the Asian session and is showing limited movement in European trade
  • 108.61 was tested earlier in support and is a weak line
  •  There is resistance at 109.47
  • Current range: 108.61 to 109.47

Further levels in both directions:

  • Below: 108.61, 107.49 and 106.72
  •  Above: 109.47, 110.68, 111.45, and 112.48

OANDA’s Open Positions Ratio

USD/JPY ratio has show gains in short positions. Currently, short positions have a majority (57%), indicative of trader bias towards USD/JPY continuing to move 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.