USD/JPY – Yen Surges to 4-Month High as China Devalues Currency

The Japanese yen continues to shine this week, and has posted sharp gains on Thursday. Early in the North American session, USD/JPY is trading at 117.80. The yen strengthened after China devalued the yuan. On the release front, Japan will release Average Cash Earnings later in the day, followed by Leading Indicators early on Friday. In the US, Unemployment Claims came in at 277 thousand, worse than expected.

The Japanese yen has posted sharp gains on Thursday, climbing 100 points against the US dollar. The New Year has started in superb fashion for the yen, which has improved by 200 points. Investors started buying the safe-haven yen early in the week, following weak Chinese manufacturing data, which underscored the slowdown affecting the world’s second largest economy. Rising tensions between Saudi Arabia and Iran and a surprise nuclear device test by North Korea further decreased any appetite for risk. The yen has received a further helping hand as China devalued its currency, the yuan, by over 0.5%. This move has led to sharp declines on world stock markets and has propelled the yen to its highest levels against the greenback since August.

US job data started off 2016 in style, as ADP Nonfarm Payrolls jumped to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. The ISM Non-Manufacturing PMI came in at 55.3 points, short of the estimate of 56.0 points. Still, this reading points to solid expansion in the services sector and underscores that the US economy is headed in the right direction. The Federal Reserve released the minutes of its December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call. The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but US inflation levels will play an important role in the timing and size of future rate hikes.

USD/JPY Fundamentals

Thursday (Jan. 7)

• 7:30 US Challenger Job Cuts
• 8:30 US Unemployment Claims. Estimate 271K
• 10:30 US Natural Gas Storage. Estimate -95B
• 20:30 Japanese Average Cash Earnings. Estimate 0.0%

Friday (Jan. 8)

• 12:00 Japanese Leading Indicators. Estimate 103.9%
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 203K
• 8:30 US Unemployment Rate. Estimate 5.0%

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Thursday, January 7, 2016

USD/JPY January 7 at 14:10 GMT

USD/JPY 117.80 H: 118.75 L: 117.33

USD/JPY Technical

• USD/JPY has posted losses in the Asian and European sessions. The pair is steady in North American trade.
• 116.88 is providing support
• 118.53 has switched to a resistance role as the pair continues to slide
• Current range: 116.88 to 118.53

Further levels in both directions:

• Below: 116.88, 115.45 and 113.23
• Above: 118.53, 120.40, 121.50 and 122.40

OANDA’s Open Positions Ratio

In the USD/JPY ratio, long positions continue to command a solid majority (65%), which is indicative of strong trader bias towards the pair reversing directions and moving higher.

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.