The dollar has posted gains on Wednesday, as USD/JPY trades in the low-117 range on Wednesday. On the release front, the Federal Reserve will release its policy statement, and we’ll get a look at November CPI. The markets are expecting a small decline of 0.1%. There are no Japanese releases on Wednesday.
The Federal Reserve will be in the spotlight on Wednesday, as the FOMC issues its monthly policy statement. With the US economy continuing to grow, the markets are confident that the Fed will take action and raise interest rates in the first half of 2015. One key question is whether the Fed will adjust its forward guidance; that is, will the Fed make use of policy statements to provide the markets with more information about its projections regarding interest rate policy. If this does occur, there will be less uncertainty about the Fed’s monetary policy and this could boost the US dollar against its major rivals.
The yen has served as an unwilling punching bag for the US dollar for months, and last week USD/JPY pushed above the 121 line. However, the Japanese currency has turned the tables this week, as the yen has gained 200 points on Tuesday. The safe-haven yen took advantage of a dip in the Chinese Flash Manufacturing PMI, which came in at 49.5 points. This pointed to contraction in the PMI for the first time since May and raises concerns about continuing weakness in the global economy.
Japan’s ruling Liberal Democratic Party registered a convincing election victory on the weekend, giving Prime Minister Abe a comfortable majority in the lower house of parliament. However, winning the election is likely to be the easy part, as the economy is stumbling and Abe’s economic reforms will face resistance from the upper house. Growth and inflation have not met the government’s target and the yen has tumbled to around 120 under “Abenomics”, with the BoJ implementing radical monetary easing. Meanwhile, the Japanese Tankan indices were a mix in the Q3 readings. The Manufacturing Index dipped to 12 points, down from 13 points in Q2. There was better news from the Non-Manufacturing Index, improving to 16 points, up from 14 points in Q2. The yen showed little response to these key releases.
USD/JPY for Wednesday, December 17, 2014
USD/JPY December 17 at 12:30 GMT
USD/JPY 117.19 H: 117.50 L: 116.45
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 113.16 | 114.57 | 116.66 | 117.94 | 118.69 | 119.83 |
- USD/JPY posted strong gains in the Asian session, breaking past resistance at 116.66. The pair is steady in the European session.
- 117.94 is an immediate resistance line.
- 116.66 has reverted to a support role as the dollar has posted gains. 114.57 is stronger.
- Current range: 116.66 to 117.94
Further levels in both directions:
- Below: 116.69, 114.57, 113.16, 112.94 and 110.68
- Above: 117.94, 118.69, 119.83, 120.63 and 121.39
OANDA’s Open Positions Ratio
USD/JPY ratio is unchanged on Wednesday, continuing the trend we have seen throughout the week. This is not consistent with the pair’s movement, as the dollar has posted gains. The ratio has a majority of long positions, indicative of trader bias towards the dollar continuing to move higher.
USD/JPY Fundamentals
- 13:30 US CPI. Estimate -0.1%.
- 13:30 US Core CPI. Estimate 0.1%.
- 13:30 US Current Account. Estimate -98B.
- 15:30 US Crude Oil Inventories. Estimate -2.6M.
- 19:00 US FOMC Economic Projections.
- 19:00 US FOMC Statement.
- 19:00 US Federal Funds Rate. Estimate <0.25%.
- 19:30 US FOMC Press Conference.
*Key releases are highlighted in bold
*All release times are GMT
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