USD/JPY – Yen Slide Continues, Markets Eye US Jobs Report

USD/JPY has posted considerable gains on Tuesday, continuing the upward trend which marked the pair on Monday. The pair is trading at the 109.20 line in the European session. On the release front, Japanese 10-year bonds continue to post negative yields, a result of the BoJ’s monetary stance which includes negative interest rates. Today’s major event is US JOLT Jobs Openings, with the markets expecting a reading of 5.55 million. On Wednesday, Japan releases Current Account, with the account surplus expected to widen to JPY 1.90 trillion.

The yen has dropped sharply this week, posting losses of 180 points. The currency dipped on Monday, following the release of the BoJ minutes. The minutes indicated that some BoJ members felt that the central bank’s inflation target of 2.0% is not reflective of the current economic situation and needs to be lowered. As well, some policymakers said that the BoJ’s recent policy of negative rates should be maintained, as a withdrawal from the policy, which was adopted in January, could confuse the markets and undermine confidence in the BoJ. Meanwhile, Japanese officials continue to warn against “currency manipulations”. On Monday, Finance Minister Taro Aso said Monday that the government would intervene if currency movements affected the country’s economic and fiscal policies. However, it is doubtful that the government or the BoJ can do much to prevent speculators who have their eye on the yen, which has surged in 2016.

Is the US labor market in trouble? Employment numbers have impressed for most of 2016, but last week’s numbers were soft. Nonfarm Payrolls looked awful in April, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. Earlier in the week, the ADP Nonfarm Payrolls and Unemployment Claims softened and fell short of their estimates. In other job releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%. We’ll get another look at US job numbers later on Tuesday, with JOLTS Job Openings expected to climb to 5.55 million.

What’s next from the Federal Reserve? In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed appeared to leave the open to a June hike, but the weak payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017.

USD/JPY Fundamentals

Monday (May 9)

• 23:45 Japanese 10-year Bond Auction. Actual -0.10%

Tuesday (May 10)

• 3:15 US FOMC Member William Dudley Speaks
• 6:00 US NFIB Small Business Index. Estimate 93.2
• 10:00 US JOLTS Openings. Estimate 5.55M
• 10:00 US Wholesale Inventories. Estimate 0.2%

Upcoming Key Updates

Wednesday (May 11)

• 19:50 Japanese Current Account. Estimate 1.90T

*Key releases are highlighted in bold

*All release times are EDT

USD/JPY for Tuesday, May 10, 2016

USD/JPY May 10 at 6:00 EDT

Open: 108.36 Low: 108.27 High: 109.11 Close: 109.15

USD/JPY Technical

• USD/JPY has posted gains in the Asian and European sessions
• 108.37 has switched to a support level following strong gains by USD/JPY in the Tuesday session. It is a weak line and could see further action during the day
• There is resistance at 109.87
• Current range: 108.37 to 109.87

Further levels in both directions:

• Below: 108.37, 107.57, 106.19, and 105.18
•  Above: 109.87, 110.66 and 111.30

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Tuesday. Long positions continue to command a strong majority (70%). This is indicative of strong trader bias towards USD/JPY continuing to move to higher ground.

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.