The Japanese yen has posted gains on Tuesday, following a lackluster start to the week. USD/JPY is currently trading at 101.80. On the release front, Japan announced the first step in its stimulus package, totaling JPY 13.4 trillion. Japanese Consumer Confidence came in at 41.3, short of expectations. We’ll get a look at the BoJ minutes later today. In the US, today’s major event is Personal Spending, with the estimate standing at 0.3%. On Wednesday, the US releases two key events – ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change.
The markets have been abuzz since Japanese Prime Minister Shinzo Abe announced a JPY 28 trillion stimulus, which was larger than expected. The plan was approved by the cabinet on Tuesday, and will include JPY 13.4 trillion of fiscal measures, with new spending to start this year. Will this be enough to kick-start the languishing economy? It will be a tough task to convince the Japanese consumer, who remains deeply pessimistic and will be reluctant to loosen the purse strings. Meanwhile, Japanese finance officials appear glued to their forex screens, sending out nervous messages every time the yen gains ground. This was the case again on Tuesday, as Japanese Finance Minister Taro Aso said he was concerned about “extremely nervous moves” from the currency markets and that the government would continue to monitor currency movements.
It was a banner week for the Japanese currency, as USD/JPY plunged some 430 points last week, its sharpest weekly decline since February. On Friday, the US dollar was broadly lower, courtesy of a surprisingly soft US GDP report. Preliminary GDP for the second quarter was projected at 2.6%, but posted a much smaller gain of 1.6%. The yen jumped all over the greenback, gaining almost 300 points. The soft reading not only pushed the dollar lower, but has dampened enthusiasm regarding a rate hike by the Fed, which last week stayed the course and held interest rates at 0.25%. On Monday, FOMC William Dudley, a close ally of Janet Yellen, said that the Brexit fallout posed a risk to the US economy and urged the Fed to proceed with caution before raising interest rates. The US will release wage growth and nonfarm payrolls later in the week, and these key employment numbers will be carefully monitored by the Fed as it mulls over a possible rate hike. If these releases do not meet expectations, the likelihood of a move in September will sharply decrease.
Monday (August 1)
- 19:50 Japanese Monetary Base. Estimate 24.3%. Actual 24.7%
- 23:45 Japanese 10-year Bond Auction. Actual -0.05%
Tuesday (August 2)
- 1:00 Japanese Consumer Confidence. Estimate 42.2. Actual 41.3
- 8:30 US Core PCE Price Index. Estimate 0.1%
- 8:30 US Personal Spending. Estimate 0.3%
- 8:30 US Personal Income. Estimate 0.3%
- All Day – US Total Vehicle Sales. Estimate 17.1M
- BoJ Monetary Policy Meeting Minutes
Upcoming Key Events
Wednesday (August 3)
- 8:15 ADP Non-Farm Employment Change. Estimate 171K
- 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0
*Key events are in bold
*All release times are EDT
USD/JPY for Tuesday, August 2, 2016
USD/JPY August 2 at 11:50 EDT
Open: 102.31 High: 102.83 Low: 101.42 Close: 101.76
- USD/JPY was flat in the Asian session and has posted considerable losses in the European session
- 101.20 is providing support
- There is resistance at 102.36
- Current range: 101.20 to 102.36
Further levels in both directions:
- Below: 101.20, 99.71 and 0.9895
- Above: 102.36, 103.73, 104.99 and 105.87
OANDA’s Open Positions Ratio
The USD/JPY ratio has little movement on Tuesday. Currently, long positions have a majority (65%), indicative of trader bias towards USD/JPY reversing directions and moving to higher ground.