Yen Yawns as BoJ Stays on the Sidelines

USD/JPY is showing little movement in the Thursday session. In North American trade, USD/JPY is trading at 113.51, up 0.10% on the day. On the release front, the Bank of Japan maintained monetary policy and held short-term interest rates at -0.10%. In the US, Final GDP in the third quarter came in at 3.2%, just short of the estimate of 3.3%. Other US data was a mix. The Philly Fed Manufacturing Index jumped to 26.2, above the forecast of 21.5 points. Unemployment Claims disappointed, climbing to 245 thousand. This was much higher than the estimate of 232 thousand. Friday also promises to be busy, with the release of three key indicators – Core Durable Goods, New Home Sales and UoM Consumer Sentiment.

There were no surprises from the BoJ, which wrapped up a two-day policy meeting. Policymakers voted to hold record low interest rates and the target for the 10-year government bond yield at zero percent. The BoJ acknowledged stronger economic conditions, saying that the “economy is expanding moderately”. A stronger global economy has boosted Japan’s export and manufacturing sectors. However, inflation levels remains well below the BoJ’s target of around 2 percent, and with this trend likely to continue well into 2018 or later, the BoJ is likely to hold the course on interest rate levels and its ultra-accommodative stimulus program. At a news conference, BoJ Governor stressed the importance of reaching the 2% inflation target, adding that the Bank would not “raise interest rates just because the economy is improving.”

Bank of Japan Maintains Accommodative Stance

It was a tight battle, but President Trump and his Republican colleagues are finally celebrating their landmark tax reform legislation, marking Trump’s first major legislative victory in office. On Wednesday, the House of Representatives voted to pass Trump’s tax reform bill, after it narrowly passed in the Senate, by a vote of 51-48. Trump is expected to sign the bill into law next week. The tax legislation marks the first major overhaul of the US tax code in 30 years, and reduces corporate taxes from 35% to 21%. After failing to overturn Obamacare, the Republicans finally scored a big win, and will now have to sell the tax plan to a skeptical public, with congressional elections slated for November 2018.

USD/JPY Fundamentals

Wednesday (December 20)

• Tentative – BoJ Monetary Policy Statement
• Tentative – BoJ Policy Rate. Estimate -0.10%. Actual -0.10%

Thursday (December 21)

• 1:30 BoJ Press Conference
• 8:30 US Final GDP. Estimate 3.3%. Actual 3.2%
• 8:30 US Philly Fed Manufacturing Index. Estimate 21.5. Actual 26.2
• 8:30 US Unemployment Claims. Estimate 232K. Actual 245K
• 8:30 US Final GDP Price Index. Estimate 2.1%. Actual 2.1%
• 9:00 US HPI. Estimate 0.4%. Actual 0.5%
• 10:00 US CB Leading Index. Estimate 0.4%. Actual 0.4%
• 10:30 US Natural Gas Storage. Estimate -160B

Friday (December 22)

• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate 2.1%
• 8:30 US Personal Spending. Estimate 0.5%
• 10:00 US New Home Sales. Estimate 654K
• 10:00  UoM Consumer Sentiment. Estimate 97.1

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, December 21, 2017

USD/JPY December 20 at 11:05 EDT

Open: 113.39 High: 113.64 Low: 113.20 Close: 113.51

USD/JPY Technical

USD/JPY inched higher in the Asian and posted small gains in European trade. The pair is steady in North American trade

• 112.57 is providing support
• 113.55 was tested in resistance and remains a weak line

Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.47, 111.53, 110.10 and 109.11
• Above: 113.55, 114.59 and 115.50

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (53%), indicative of slight trader bias towards USD/JPY continuing to move higher.

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.