USD/JPY – Dollar FIirts With 116 Yen, Markets Eye Tankan Indices

USD/JPY has posted slight gains in the Monday session and briefly pushed above the 116 level. Currently, the pair is trading at 115.70. On the release front, Japanese manufacturing data was mixed. Core Machinery Orders posted a strong gain of 4.1%, well above the forecast of 1.3%. However, Preliminary Machine Tool Orders posted another decline, coming in at -5.6%. On Tuesday, Japan releases the Tankan indices, with both indicators expected to show gains.

The Japanese yen continues to head south and pushed above the 116 for the first time since early February. It’s been a dismal fourth quarter for the currency, as USD/JPY has surged a remarkable 10.4% since October 1. The yen received no help from GDP data, as Final GDP for the third quarter edged up to 0.3%, short of the forecast of 0.6%. This figure disappointed the markets, as Preliminary GDP for Q3 came in at 0.5%. This downward revision will likely renew fears of a weakening recovery. The Bank of Japan will meet on December 18, and is expected to leave interest rates unchanged at -0.10%. Despite a sluggish economy, the bank has been hesitant to step in and ease policy, as negative rates have done little to kick-start economic growth or raise anemic inflation levels.

The Federal Reserve will be in the spotlight this week, as the Fed meets for its monthly policy meeting. This will be the first meeting after Donald Trump’s election as president. More importantly of course, the markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback. With Trump taking the reins in government in January, it will be interesting to see what happens early next year. Trump has stated that he plans to increase government spending and cut taxes, which could lead to higher inflation levels. The Fed has indicated that it plans to raise rates gradually in 2017, but this could change once the new administration’s economic policies become clearer.

USD/JPY Fundamentals

Sunday (December 11)

  • 18:50 Japanese Core Machinery Orders. Estimate 1.3%. Actual 4.1%
  • 18:50 Japanese PPI. Estimate -2.2%. Actual -2.2%
  • 23:30 Japanese Tertiary Industry Activity. Estimate 0.3%. Actual 0.2%

Monday (December 12)

  • 00:58 Japanese Preliminary Machine Tool Orders. Actual -5.6%
  • 13:01 US 10-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate -99.5B

Upcoming Key Events

Tuesday (December 13)

  • 18:50 Japanese Tankan Manufacturing Index. Estimate 10 points
  • 18:50 Japanese Tankan Non-Manufacturing Index. Estimate 19 points

*All release times are EST

*Key events are in bold

USD/JPY for Monday, December 12, 2016

USD/JPY December 12 at 7:00 EST

Open: 115.42 High: 116.12 Low: 115.15 Close: 115.65

USD/JPY Technical

S3 S2 S1 R1 R2 R3
112.48 113.86 114.13 115.88 116.88 118.05
  • USD/JPY showed limited movement in the Asian session. The pair has posted slight gains in European trade
  • 114.13 is a strong support line
  • 115.88 was tested in resistance earlier and could break in the Monday session
  • Current range: 114.13 to 115.88

Further levels in both directions:

  • Below: 114.13, 113.86, 112.48 and 111.45
  •  Above: 115.88, 116.88 and 118.05

OANDA’s Open Positions Ratio

USD/JPY ratio is showing short positions with a strong majority (59%). This is indicative of trader bias towards USD/JPY reversing directions and moving lower.

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.