USD/JPY – Yen Edges Higher as Abe Calls Snap Election

USD/JPY has started the week quietly. In Monday’s North American session, the pair is trading at 111.75, down 0.22% on the day. On the release front, Japanese Flash Manufacturing PMI edged lower to 52.6, short of the forecast of 53.4 points. Later in the day, the BoJ releases the minutes of its monetary policy meeting, and Japan publishes the Services Producer Price Index, which is expected to improve to 0.7%. There are no US economic releases, but there are three FOMC members holding speaking engagements – William Dudley, Charles Evans and Neel Kashkari. On Tuesday, the US releases CB Consumer Confidence and New Home Sales. Federal Chair Janet Yellen will speak at an event in Cleveland.

Japanese Prime Minister Shinzo Abe called a snap general election on Monday, which will be held on October 22. The announcement was a poorly held secret, with news outlets reporting last week that Abe would make the announcement on Monday. Abe has seen his ratings improve over the North Korean crisis and hopes to take advantage of a divided opposition and an improved economy. Japan’s GDP expanded 2.5% in the second quarter, and the economy has now expanded for six consecutive quarters, as stronger global demand has boosted the manufacturing and export sectors. However, the country’s radical stimulus program, known as ‘Abenomics’, has failed to improve inflation, which remains well below the BoJ’s target of just below 2.0%.

Federal Reserve policymakers have been divided over a rate hike in December, which would mark a third rate increase in 2017. With no clear message from the Fed, the markets really don’t know what to expect, and fed futures have priced in a December hike at 55%. On Monday, New York Fed President William Dudley made a strong case to raise rates. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed’s target of 2% in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. In last week’s rate statement, the Fed announced that it would reduce its $4.2 trillion balance sheet by $50 billion/mth, starting in October.

USD/JPY Fundamentals

Sunday (September 24)

• 20:30 Japanese Flash Manufacturing PMI. Estimate 53.4. Actual 52.6

Monday (September 25)

• 1:35 BoJ Governor Kuroda Speaks
• 8:30 US FOMC Member William Dudley Speaks
• 12:40 US FOMC Member Charles Evans Speaks
• 18:30 US FOMC Member Neel Kashkari Speaks
• 19:50 Japanese Monetary Policy Meeting Minutes
• 19:50 Japanese SPPI. Estimate 0.7%

Tuesday (September 26)

• 10:00 US CB Consumer Confidence. Estimate 119.6
• 10:00 US New Home Sales. Estimate 591K
• 12:45 Fed Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, September 25, 2017

USD/JPY September 25 at 11:05 EDT

Open: 111.99 High: 112.53 Low: 111.74 Close: 112.75

USD/JPY Technical

USD/JPY inched higher in the Asian session. The pair posted small gains in the European session but then retracted. USD/JPY is steady in the North American session.

• 110.94 is providing support
• 112.57 is a weak resistance line

Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 110.10, 108.69 and 107.49
• Above: 112.57, 113.55 and 114.49

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (55%). This is indicative of trader bias towards USD/JPY continuing to move to higher 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.