USD/JPY – Yen Edges Higher as Yellen Mum on Interest Rate Plans

USD/JPY has posted slight losses in the Friday session. In North American trade, the pair is trading at 109.26, down 0.26% on the day. On the release front, Tokyo Core CPI improved to 04%, edging above the estimate of 0.3%. In the US, durable goods reports were mixed. Core Durable Goods Orders improved to 0.5%, edging above the estimate of 0.4%. However, Durable Goods Orders declined 6.8%, weaker than the estimate of -6.0%. At the Jackson Hole meeting of central bankers, Janet Yellen has concluded her speech and the yen has responded with slight gains.

Federal Reserve Chair Yellen spoke at the Jackson Hole Symposium earlier in the day. Yellen did not take advantage of an ideal opportunity to address US monetary policy, choosing instead to discuss financial reforms, saying that measures put in place in 2007 and 2009 had been effective, adding that future reforms should remain modest. Her comments seemed aimed at a domestic audience, as her message to exercise caution comes at a time when President Trump is looking into wide-ranging reforms in the finance industry. The pro-business Trump has complained that the financial sector is over-regulated and has said that he wants to ease current regulations.

The Fed has not provided much guidance in recent weeks as to its plans regarding interest rates, and Janet Yellen did not address the issue in her speech at Jackson Hole. A December rate hike remains on the table, but the Fed policymakers have sounded lukewarm about another hike in 2017, and the odds of a rate hike in December remain below 50%. One of the principal impediments to rate hike is inflation, which remains at stubbornly low levels. This, despite solid economic growth and a labor market that is close to capacity.

Like other Western economies, Japan remains gripped with low inflation. This has resulted in the Bank of Japan keeping in place its ultra-accommodative monetary policy. Unlike the US and Europe, however, the BoJ has given no indications of tightening policy anytime soon, insisting that that inflation must first rise closer to its target of 2%. There was some good news from Tokyo Core CPI, the primary gauge of consumer inflation, in August. The indicator gained 0.4%, marking its strongest gain since April 2015. The economy is headed in right direction, as GDP has expanded for six consecutive quarters. In the second quarter, GDP impressed with a gain of 1.0%, well above the forecast of 0.6%. Still, with inflation nowhere near the BoJ’s target, the bank’s radical stimulus program is likely to remain in place for the foreseeable future.

Fed Chair Defends US Financial Rules at Jackson Hole

USD/JPY Fundamentals

Thursday (August 24)

• 19:30 Japanese National Core CPI. Estimate 0.5%. Actual 0.5%
• 19:30 Japanese Tokyo Core CPI. Estimate 0.4%. Actual 0.3%
• 19:50 Japanese SPPI. Estimate 0.8%. Actual 0.6%

Friday (August 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.4%. Actual 0.5%
• 8:30 US Durable Goods Orders. Estimate -6.0%. Actual -6.8%
• 10:00 US Fed Chair Janet Yellen Speaks
• All Day – Jackson Hole Symposium (Day 2)

*All release times are GMT

*Key events are in bold

USD/JPY for Friday, August 25, 2017

USD/JPY August 25 at 12:20 EDT

Open: 109.55 High: 109.84 Low: 109.11 Close: 109.28

USD/JPY Technical

USD/JPY showed little movement in the Asian and European sessions. The pair has edged lower in North American trade

• 108.69 is providing support
• 110.10 is the  next resistance line

Current range: 108.69 to 110.10

Further levels in both directions:

• Below: 108.63, 107.49 and 106.28
•  Above: 110.10, 110.94, 112.57 and 113.55

OANDA’s Open Positions Ratios

In the Friday session, USD/JPY ratio is showing long positions with a majority (64%). This is 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.