USD/JPY – Yen Flat as BoJ Shows Cautious Optimism

USD/JPY is showing little movement on Thursday, as the pair trades just above the 111 line. On the release front, the BoJ maintained interest rates at -0.10%. Later in the day, consumer indicators will be in the spotlight, with the release of Household Spending and a host of inflation indicators, led by Tokyo Core CPI. In the US, key indicators all disappointed, as Core Durable Goods, Unemployment Claims, and Pending Home Sales missed their estimates. On Friday, the US will publish Advance GDP, which is expected to gain 1.3%. We’ll also get a look at UoM Consumer Sentiment.

The Bank of Japan held course and maintained interest rates at -0.10%. The negative rates are part of the BoJ’s ultra-loose monetary policy, which is expected to continue until inflation levels move closer to the central bank’s target of around 2 percent. The BoJ sounded optimistic about the economy, but acknowledged that monetary policy was unlikely to change in the near future. The BoJ is maintaining its asset-purchase program at 80 trillion yen annually, dampening hopes that the central bank might taper the purchases in response to an improving economy. Analysts noted that the BOJ’s quarterly outlook report said that the economy was moving towards “economic expansion”, the first time the report has used the word “expansion” since 2008. The BoJ is clearly in no rush to change its monetary stance, and will likely hold course unless inflation levels move closer to the BoJ’s target of about 2%.

President Trump has repeatedly promised a major reform of the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals’ overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump’s proposal should be viewed as a blueprint that is a long way off from becoming law. Trump’s proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn’t been much reaction from the currency markets, with the dollar showing limited movement against the Japanese yen and other major currencies in Thursday trading.

Mnuchin and Cohn Present Trump Tax Proposal

USD/JPY Fundamentals

Wednesday (April 26)

  • 23:14 BoJ Outlook Report
  • 23:14 BoJ Policy Rate. Estimate -0.10%. Actual -0.10%
  • 23:14 BoJ Monetary Policy Statement

Thursday (April 27)

  • 2:30 BoJ Press Conference
  • 8:30 US Core Durable Goods Orders. Estimate +0.4%. Actual -0.2%
  • 8:30 US Unemployment Claims. Estimate 241K. Actual 257K
  • 8:30 US Durable Goods Orders. Estimate 1.5%. Actual 0.7%
  • 8:30 US Goods Trade Balance. Estimate -65.2B. Actual -64.8B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%. Actual -0.1%
  • 10:00 US Pending Home Sales. Estimate -0.6%. Actual -0.8%
  • 10:30 US Natural Gas Storage. Estimate 72B. Actual 74B
  • 19:30 Japanese Household Spending. Estimate -0.6%
  • 19:30 Japanese Tokyo Core CPI. Estimate -0.2%
  • 19:30 Japanese National Core CPI. Estimate 0.2%
  • 19:30 Japanese Unemployment Rate. Estimate 2.9%
  • 19:50 Japanese Preliminary Industrial Production. Estimate -0.6%
  • 19:50 Japanese Retail Sales. Estimate 1.6%

Friday (April 28)

  • 8:30 US Advance GDP. Estimate 1.3%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 98.1

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, April 27, 2017

USD/JPY April 27 at 11:30 EST

Open: 111.17 High: 111.60 Low: 111.06 Close: 111.13

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.54 109.77 110.94 112.57 113.55 114.96

USD/JPY was flat in the Asian session. The pair posted slight gains in European trade but has retracted in the North American

  • 110.94 is providing weak support
  • 112.57 is the next line of resistance
  • Current range: 110.94 to 112.57

Further levels in both directions:

  • Below: 110.94, 109.77, 108.54 and 107.49
  •  Above: 112.57, 113.55 and 114.96

OANDA’s Open Positions Ratio

USD/JPY is showing gains in short positions. Currently, long positions have a majority (56%), indicative of trader bias towards USD/JPY breaking out and posting gains.

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.