USD/JPY – Yen Edges Higher, Japanese Manufacturing PMI Next

USD/JPY has started the week with slight losses, as the pair currently is trading at 113.70. On the release front, Japan released two minor events. Japanese All Industries Activity edged up to 0.3%, but this was shy of the forecast of 0.4%. Later in the day, we’ll get a look at Flash Manufacturing PMI, with the index expected to improve to 52.3 points. There are no US events on the schedule.

Donald Trump was sworn in as the president on Friday, as the Trump era has begun. The inauguration proceeded without incident, but anti-Trump protesters responded with a massive protest on Saturday in Washington, much to the irritation of Trump. Although there is an unwritten rule that a new president is granted 100 days of grace, this may not prove to be the case this time around. The bruising election campaign is still fresh, Trump is in a combative mood and continues to snipe at the media, so chivalry and goodwill may be in short supply. As we enter uncharted territory and begin the Trump era, how will the US dollar react? On Friday, Oanda’s Stephen Innes provided this assessment:

the downside risk for the USD remains elevated more so from Trump’s inauguration if he fails to underscore economic policy. On the other hand, if Donald comes out firing on all fiscal stimulus cylinders, bond yield will surge, and the greenback would catch an enormous updraft… the President–elect takes centre stage as we begin a new chapter in American politics and global financial markets. Buckle up; we are likely in for a wild ride in the coming 100 days [see the link below for the full article]

We begin a new chapter for the US Dollar

Donald Trump’s economic policies have yet to be outlined, but at his inauguration, Trump vowed to live by the mantra of “America first”. This has triggered alarm among US trading partners, including Japan, which is heavily reliant on its export sector. As part of his protectionist stance, Trump has promised to pull the US out of the  Trans-Pacific Partnership, of which Japan is a key member. If this happens, the weak Japanese yen could resume its slide. How low could the yen go? The BoJ has been reluctant to step in and prop up the currency, but the markets believe that the bank will not let the yen fall below the 125 level, which has been labeled the “Kuroda line”. In early 2016, when the yen was trading close to the 124 line, Japanese officials warned against what they termed “currency manipulations” and threatened to intervene in order to boost the yen’s value. This led to a public backlash from US officials as fears of a currency war escalated. If the yen continues to weaken, we could see tensions escalate between the US and Japan.

USD/JPY Fundamentals

Sunday (January 22)

      • 23:30 Japanese All Industries Activity. Estimate 0.3%. Actual 0.4%

Monday (January 23)

      • 19:30 Japanese Flash Manufacturing PMI. Estimate 52.3

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, January 23, 2017

USD/JPY January 23 at 7:00 EST

Open: 113.80 High: 113.97 Low: 113.15 Close: 113.68

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.85 110.94 112.57 113.80 114.83 115.90
      • USD/JPY posted slight losses in the Asian session but has recovered in the European session
      • 112.57 is providing support
      • 113.80 is a weak resistance line
      • Current range: 112.57 to 113.80

Further levels in both directions:

      • Below: 112.57, 110.94 and 109.85
      •  Above: 113.80, 114.83, 115.90 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Monday session. Currently, short and long positions are almost an even split, 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.