USD/JPY – Yen Improves on Lackluster Fed Statement

USD/JPY has posted losses in the Thursday session, erasing the gains from Wednesday. Currently, the pair is trading at 112.30. On the release front, Japanese Consumer Confidence remains weak, as the reading of 43.2 missed the estimate of 43.7. In the US, today’s highlight is Unemployment Claims, with the markets expecting claims to drop to 251 thousand. Employment data will be under the spotlight on Friday, as the US releases Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

There were no surprises from the Fed on Wednesday. The Fed opted for the sidelines, leaving the benchmark interest rate at 0.50%. The markets were hoping to glean something from the rate statement, but the Fed didn’t have much to add. The statement was upbeat about the economy and said that inflation continues to move towards the Fed’s target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in 70%. However, the big question mark for the markets and the Fed is one Donald Trump, who remains an enigma, as his economic policy remains unclear – Trump has promised substantial fiscal spending and tax cuts, but hasn’t provided any details. Just a few months ago, a red-hot economy led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude, watching what bills Trump gets through Congress and how the economy responds.

Trump On, Trump Off, Fed an Onlooker

President Donald Trump has not hesitated to butt heads with world leaders, and on Tuesday it was the turn of China, Germany and Japan, as Trump accused them of devaluating their currencies in order to gain an unfair trade advantage. On Wednesday, Japan flatly denied the claim of currency manipulation, saying that Japan’s monetary policy was aimed at curbing deflation and not lower the value of the yen. Trump and Japanese Prime Minister will meet in Washington on February 10, and it’s a sure thing that currency policy will be high up the list on the agenda of the meeting. The BoJ sent off its own warning about currency manipulation when the dollar pushed above the 120 level, but BoJ Governor Haruhiko Kurodo recently stated that the bank does not have a target for the currency.

USD/JPY Fundamentals

Thursday (February 2)

• 00:00 Japanese Consumer Confidence. Estimate 43.7. Actual 43.2
• 7:30 US Challenger Job Cuts
• 8:30 US Unemployment Claims. Estimate 251K
• 8:30 US Preliminary Nonfarm Productivity. Estimate 1.0%
• 8:30 US Preliminary Unit Labor Costs. Estimate 2.3%
• 10:30 US Natural Gas Storage. Estimate -82B

Upcoming Key Releases

Friday (February 3)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 170K
• 8:30 US Unemployment Rate. Estimate 4.7%
• 10:00 US ISM Nonfarm Manufacturing PMI. Estimate 57.0

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, February 2, 2017

USD/JPY February 2 at 6:55 EST

Open: 113.29 High: 113.29 Low: 112.73 Close: 112.31

USD/JPY Technical

USD/JPY edged lower in the Asian session. In European trade, the pair posted small gains but has retracted

• 110.94 is providing support
• 112.57 is the next resistance line
• Current range: 110.94 to 112.87

Further levels in both directions:

• Below: 110.94, 109.85 and 108
•  Above: 112.57, 113.80, 114.83 and 115.90

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Thursday session. Currently, long positions have a slim majority (52%). This is indicative of slight trader bias towards USD/JPY 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.