USD/JPY – Yen in Holding Pattern Ahead of Fed, BoJ Statements

USD/JPY continues to drift on Wednesday, as the pair trades at 111.40 in the European session. On the release front, the spotlight is on the central banks, as the Federal Reserve and Bank of Japan both release policy statements during the day. As well, there are key economic releases in both countries. The US will publish Pending Home Sales, while Japan releases Retail Sales and Tokyo Core CPI. It’s been a very quiet week so far for USD/JPY, but traders should be prepared for possible volatility in the North American session. On Thursday, there are two key events – Advance GDP and Unemployment Claims.

All eyes are on the Federal Reserve and BoJ, which will set rates and release policy statements on Wednesday. Will we see any monetary moves from the central banks? With the Fed widely expected to maintain interest rates at the current level of 0.25%, the markets will be carefully monitoring the tone of the policy statement. Janet Yellen has sounded cautious about the health of the US economy, and if the Fed continues on this path and sends out a dovish message, the dollar could soften against its major rivals. At the same time, any clues about a June rate hike could bolster the greenback. As for the BoJ, there is a strong possibility that the central bank will implement further stimulus measures in order to kick-start the weak Japanese economy. In January, the central bank shocked the markets when it adopted negative interest rates for the first time, but this step has not bolstered inflation or led to increased economic growth. If the BoJ decides to lower interest rates, the yen, which posted sharp losses late last week, could resume its slide against the dollar.

The US economy continues to expand, but there are some weak spots, including the manufacturing sector. Core Durable Goods dropped 0.2%, well off the estimate of a 0.6% gain. This marked the fourth decline in five months. Durable Goods Orders was stronger at 0.8%, but also missed expectations, as the estimate stood at 1.9%. Recent manufacturing reports, such as the Philly Fed Mfg. Index, have also been soft, as the industry has been hard-hit by weak global demand and a downturn in the US oil industry due to low crude prices.

USD/JPY Fundamentals

Wednesday (April 27)

• 00:30 Japanese All Industries Activity. Estimate -1.3%. Actual -1.2%
• 8:30 US Goods Trade Balance. Estimate -62.5B
• 10:00 US Pending Home Sales. Estimate 0.3%
• 10:30 US Crude Oil Inventories. Estimate 1.4M
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <0.50%
• 19:30 Japanese Household Spending. Estimate -4.0%
• 19:30 Japanese Tokyo Core CPI. Estimate -0.3%
• 19:30 Japanese National Core CPI. Estimate -0.2%
• 19:30 Japanese Unemployment Rate. Estimate 3.3%
• 19:50 Japanese Retail Sales. Estimate -1.4%
• Tentative – BoJ Monetary Policy Statement

Upcoming Key Events

Thursday (April 28)

• 1:00 BoJ Outlook Report
• Tentative – BOJ Press Conference
• 8:30 US Advance GDP. Estimate 0.7%.
• 8:30 US Unemployment Claims. Estimate 258K

*Key releases are highlighted in bold

*All release times are EDT

USD/JPY for Wednesday, April 27, 2016

USD/JPY April 27 at 6:30 EDT

Open: 111.21 Low: 111.02 High: 111.40 Close: 111.39

USD/JPY Technical

• USD/JPY has shown limited movement in Asian and European sessions
• 110.66 is providing support
• 111.50 remains a weak line and could break during the day
• Current range: 110.66 to 111.50

Further levels in both directions:

• Below: 110.66, 109.87, 108.37 and 107.57
•  Above: 111.50, 112.41 and 113.51

OANDA’s Open Positions Ratio

USD/JPY ratio is showing long positions with a strong majority (62%). This is indicative of strong trader bias towards the pair resuming its upward move.

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.