USD/JPY – Yen Strengthens as US Political Risk Weighs on Greenback

USD/JPY has posted losses in the Wednesday session. In the North American session, the pair is trading just above the 113 line. On the release front, Japanese PPI was unchanged at 2.1%, matching the forecast. Japanese Tertiary Activity declined 0.1%, its second decline in three months. In the US, Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. On Thursday, the US releases PPI and unemployment claims. As well, Janet Yellen will testify before the Senate Banking Committee.

All eyes are on Janet Yellen, who testifies before a congressional committee on Wednesday. Yellen’s prepared remarks were released ahead of her testimony, and there were no surprises. Yellen said that the Fed is on track to raise rates and begin reducing its balance sheet before the end of the year. The markets are skeptical about another rate hike, despite the Fed optimism. This is largely due to weak inflation numbers. Although the labor market remains close to capacity, this has not translated into stronger wage growth, a key driver of inflation. The CME Group has pegged a December rate increase at just 47%, while other forecasts are pointing to odds as low as 40%. Unless growth and inflation numbers move higher, the markets are likely to remain lukewarm about the likelihood of a third rate hike in 2017.

Japan’s economy has improved in 2017, buoyed by a stronger global economy. This has translated into increased demand for Japanese goods and has boosted the manufacturing and export sectors. The Tankan Manufacturing Index jumped to 17 in the first quarter, its strongest showing since 2014. On Tuesday, Preliminary Machine Tool Orders improved in June to 31.1%, up from 24.4% a month earlier. We’ll get a look at Preliminary Industrial Production on Friday. The indicator recorded a strong gain of 4.0% in April, but the markets are braced for a sharp downturn in June, with an estimate of -3.3%.

Smoke There’s Fire

JPY and Central Bank correlation

USD/JPY Fundamentals

Tuesday (July 11)

• 19:50 Japanese PPI. Estimate 2.1%. Actual 2.1%

Wednesday (July 12)

• 00:30 Japanese Tertiary Industry Activity. Estimate -0.5%. Actual -0.1%
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:30 US Crude Oil Inventories. Estimate -3.2M
• 13:01 US 10-y Bond Auction
• 14:00 US Beige Book

Upcoming Key Events

Thursday (July 13)

• 8:30 US PPI. Estimate 0.0%
• 8:30 US Unemployment Claims. Estimate 245K
• 10:00 US Federal Chair Janet Yellen Testifies

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, July 12, 2017

USD/JPY July 12 at 10:10 EDT

Open: 113.94 High: 113.97 Low: 112.93 Close: 113.09

USD/JPY Technical

USD/JPY posted losses in the Asian session. The pair showed limited movement in the European session. In North American trade, the pair posted losses but has recovered some of these losses

• 112.57 is providing support
• 113.55 has switched to a resistance role following losses by USD/JPY on Wednesday

Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.57, 110.94 and 110.10
•  Above: 113.55, 114.37, 115.51 and 116.87

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Wednesday session. Currently, short positions have a majority (54%), indicative of trader bias towards USD/JPY continuing to lose 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.