USD/JPY – Little Movement as Fed Minutes Slightly Dovish

USD/JPY continues to trade close to the 113 line this week. The pair has dipped on Wednesday and is trading at 112.88. On the release front, Japanese SPPI edged up to 0.5%, above the forecast of 0.4%. In the US, today’s highlight is unemployment claims, with an estimate of 242 thousand. As well, Treasury Secretary Robert Mnuchin will speak at an interview with CNBC.

On Wednesday, the Federal Reserve released the minutes of its January policy meeting. However, there were no dramatic nuggets in the minutes. The Fed stated that a rate hike “fairly soon” could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump’s fiscal stimulus plan but little concern over the risk of inflation. Bottom line? Although pressure is slowly building towards a rate hike, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.

With the Japanese yen hovering at low levels, imports have become pricier for Japanese consumers. Predictably, the response has been a drop in consumer spending. In its monthly economic report, the government lowered its assessment of consumer spending, the first downgrade in 11 months. Conversely, the weak yen has been a boom for exports, prompting the government to raise its assessment of exports for the first time in four months. The report did not change the overall assessment that the economy is recovering at a moderate clip. Japanese policymakers are concerned about the protectionist stance under President Donald Trump. Japanese Prime Minister Shinzu Abe met recently with Trump in Washington and defused a currency policy crisis. Still, Trump is unhappy with the trade balance between the two countries, so we could see tensions over trade relations in the coming months.

USD/JPY Fundamentals

Wednesday (February 22)

• 18:50 Japanese SPPI. Estimate 0.4%. Actual 0.5%

Thursday (February 23)

• 7:00 US Treasury Secretary Steven Mnuchin Speaks
• 8:30 US Unemployment Claims. Estimate 242K
• 9:00 US HPI. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate -86B
• 11:00 US Crude Oil Inventories. Estimate 3.4M
• 13:00 US FOMC Member Robert Kaplan Speech

Upcoming Key Events

Friday (February 24)

• 10:00 US New Home Sales. Estimate 575K
• 10:00 US Revised UoM Consumer Sentiment. Estimate 96.1

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, February 23, 2017

USD/JPY February 23 at 7:30 EST

Open: 113.40 High: 113.42 Low: 112.83 Close: 112.88

USD/JPY Technical

USD/JPY has showed little movement in the Asian session and has posted slight losses in European trade

• 112.57 is providing support
• 113.80 is the next resistance line
• Current range: 112.57 to 113.80

Further levels in both directions:

• Below: 112.57, 110.94 and 109.77
•  Above: 113.80, 114.83, 115.90 and 116.70

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (57%), indicative of trader bias towards USD/JPY reversing directions and moving upwards.

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.