USD/JPY – Tax Reform Bill, Strong US Job Report Pushes Dollar Higher

USD/JPY has posted gains in the Tuesday session, erasing the gains seen on Monday. In North American trade, USD/JPY is trading at 114.09 up 0.34% on the day. On the release front, Japanese Average Cash Earnings remained unchanged at 0.9%, above the forecast of 0.6%. In the US, JOLT Job Openings edged up to 6.09 million, easily beating the estimate of 5.98 million. Later in the day, Fed Chair Janet Yellen will speak at an event in Washington.

Investors can expect more of the same from the Bank of Japan regarding its ultra-accommodative stimulus package. The minutes from the October meeting indicated that many of the board members were satisfied that the inflation target of around 2 percent would be met under current policy, even though inflation has persistently remained well below the target. BoJ Governor Kuroda echoed the message in the minutes, expressing optimism that the improving economy will boost inflation. Kuroda called the economic expansion “highly sustainable”, and the markets took his optimism as a sign that the BoJ has no plans to inject further stimulus in the near future.

The markets are wishing President Trump godspeed, as he tries to pass his tax reform bill through Congress. If Trump is successful, it would mark the first major tax reform since President Reagan was president. Trump suffered a humiliating defeat with his failed health care proposal, and the President has now set his sights on tax reform. Trump wants new legislation in place before the end of the year, but that will be a tall order, as most Democrats have come out against the proposal and not all Republicans are on board. The bill would cut corporate taxes from 35% to 20%, but predictably, Democrat and Republican lawmakers are at odds as to whether the bill will lower taxes for the middle class. Expectations that Trump will cut taxes has been the catalyst for a stock market rally over the past year, and if the bill does become law, the US dollar will likely gain ground.

U.S Tax Reform Optimism Fuels Markets

USD/JPY Fundamentals

Monday (November 6)

  • 19:00 Japanese Average Cash Earnings. Estimate 0.6%. Actual 0.9%

Tuesday (November 7)

  • 10:00 US IBD/TIPP Economic Optimism. Estimate 51.2. Actual 53.6
  • 10:00 US JOLTS Job Openings. Estimate 5.98M. Actual 6.09M
  • 12:35 US FOMC Member Randal Quarles Speaks
  • 14:30 US Federal  Reserve Chair Janet Yellen Speaks
  • 15:00 US Consumer Credit. Estimate 18.4B

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, November 7, 2017

USD/JPY November 7 at 11:00 EDT

Open: 113.71 High: 114.34 Low: 113.70 Close: 114.05

USD/JPY Technical

S3 S2 S1 R1 R2 R3
111.53 112.57 113.55 114.49 115.50 116.54

USD/JPY edged higher in the Asian and European sessions but retracted in European trade. The pair is steady in the North American session

  • 113.55 is providing support
  • 114.49 is the next resistance line

Current range: 113.55 to 114.49

Further levels in both directions:

  • Below: 113.55, 112.57, 110.94 and 110.10
  • Above: 114.49, 115.50 and 116.54

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight movement towards short positions. Currently, short positions have a majority (56%), 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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.