USD/JPY is trading quietly on Wednesday, as the pair trades just shy of the 120 line early in the North American session. In economic news, the BOJ released a monetary policy statement which did not contain any new stimulus moves. In the US, Crude Oil Inventories fell to 3.1 million, but this beat expectations. Traders should keep a close eye on two key releases on Thursday – US Unemployment Claims and the Federal Reserve Policy Meeting Minutes.
The Bank of Japan released its policy meeting statement early on Wednesday, and there were no major surprises. The BOJ said it would continue its current level of asset purchases (about $50 billion/mth) and noted that the Japanese economy continues to “recover moderately”. At the same time, the BOJ acknowledged that the Japanese economy has slowed down due to weak domestic activity and lower demand for Japanese exports. So far the BOJ has managed to avoid expanding an already huge monetary stimulus program, but with inflation under 1%, which is a far cry from the government target of 2%, the central bank may have to act in the near future if the economy doesn’t pick up at a faster pace.
The markets are keeping a close eye on the Federal Reserve, which will release the minutes of its last policy meeting on Thursday. For months, expectations had been running high that the Federal Reserve might press the rate trigger and bump up rates at the September meeting. However, the Fed stayed on the sidelines and maintained rates, and the US dollar faced broad pressure from its rivals as a result. At the same time, the policy statement had a hawkish tone, giving the markets hope that the Fed could still make a move prior to the end of the year. These hopes have been largely dashed by a dismal US Nonfarm Payrolls report late last week, as just 142 thousand jobs were created, compared to an estimate of 201 thousand. However, market sentiment can change fairly quickly, and if the US rebounds with some strong data, we’ll likely see more optimism about a rate hike. With this background in mind, Thursday’s minutes take on added significance and could have a strong impact on the currency markets.
Wednesday (October 7)
- 3:00 BOJ Monetary Policy Statement
The BOJ is not making any changes to its current stimulus program, noting that the Japanese economy continues its moderate recovery. The statement did not have any significant impact on the movement of USD/JPY.
- 5:00 Japanese Leading Indicators. Estimate 103.5%. Actual 103.4%.
- 23:50 Japanese Core Machinery Orders. Estimate 3.3%.
This important indicator should be treated as market-mover by traders. The indicator has posted back-to-back declines, but the markets are expecting a strong gain in the August report. If the indicator can match or beat the estimate, the yen could receive a boost.
- 23:50 Japanese Current Account. Estimate JPY 1.28 trillion.
Current Account is closely linked to currency demand, so we could see some movement from USD/JPY if the August reading is not within expectations. The estimate of JPY 1.28 trillion is close to the July reading of JPY 1.32 trillion.
- 14:30 US Crude Oil Inventories. Estimate 2.2 million. Actual 3.1 million.
The indicator posted a strong surplus for a second straight month, and easily beat expectations. However, this week’s reading of 3.1 million was considerably smaller than the previous week’s release of 4.0 million.
Upcoming Key Events
Thursday (Oct. 8)
- 12:30 US Unemployment Claims
This is one of the most important economic indicators, and traders should treat it as a market-mover. Unemployment Claims rose slightly last week to 277 thousand, but this was within expectations. Given the dismal Nonfarm Payrolls report last week, a weaker reading than expected could send the US dollar lower.
- 18:00 Federal Reserve FOMC Meeting Minutes
The markets will be watching this event closely, given the continuing speculation about a rate hike by the Federal Reserve. Any hints about a rate hike could boost the US dollar against the yen.
USD/JPY for Wednesday, October 7, 2015
USD/JPY October 7 at 19:25 GMT
USD/JPY 119.95 H: 120.36 L: 119.69
- USD/JPY posted modest losses late in the Asian session, and has been trading quietly in the European and North American sessions.
- 118.53 is providing strong support. 116.90 is next.
- 120.40 is an immediate resistance line and could seem more action during the day.
- Current range: 118.53 to 120.40
Further levels in both directions:
- Below: 118.53, 116.90, 115.90 and 113.86
- Above: 120.40, 121.50, 122.40 and 123.50
OANDA’s Open Positions Ratio
USD/JPY ratio has a majority of long positions, indicative of trader bias towards the US dollar moving to higher ground.