USD/JPY – Dollar Stems 5-Day Yen Rally

After dropping for five straight sessions, USD/JPY has posted small gains in the Tuesday session. In North American trade, USD/JPY is trading at 110.76, up 0.20% on the day. On the release front, Japanese indicators were mixed. PPI slowed to 3.1%, shy of the estimate of 3.3%. Tertiary Industry Activity posted a strong gain of 1.1%, easily beating the estimate of 0.4%. Later in the day, Japan releases Core Machinery Orders, which is expected to decline 1.1%. In the US, Empire State Manufacturing Index softened to 17.7, missing the forecast of 18.5 points. This marked the weakest reading since June 2017.

Bank of Japan Governor Haruhiko Kuroda was optimistic about the economy and inflation in a speech on Monday, and the yen responded by climbing to a 4-month high. Kuroda said that core CPI had improved to about 1 percent, and said that the BoJ expected the economy to “continue expanding moderately”. Back in October, Kuroda said that inflation was around zero. Although Kuroda reiterated that the BoJ will maintain its massive stimulus program, a stronger Japanese economy has raised speculation that the Bank could follow the ECB and reduce its asset purchase program, which would likely strengthen the Japanese yen. The BoJ’s quarterly report was also optimistic about inflation, stating that stronger growth would raise inflation closer to the BoJ’s target of around 2 percent. On the economic front, the report said that global demand for Japanese electronics and stronger domestic demand had helped boost economic growth.

The Bank of Japan gave the yen a boost last week, after the BoJ reduced its bond purchases. The Bank trimmed its purchase of 10 to 25 year bonds and 25 to 40 year bonds by JPY 10 billion yen each, to JPY 190 billion yen and 80 billion respectively. The cut to the 10-25 year bonds was the first in more than a year. This move, although not dramatic, has raised speculation that the Bank will taper its massive stimulus program, which would likely bode well for the Japanese yen.

USD/JPY Fundamentals

Monday (January 15)

  • 18:50 Japanese PPI. Estimate 3.3%. Actual 3.1%
  • 23:30 Japanese Tertiary Industry Activity. Estimate 0.4%. Actual 1.1%

Tuesday (January 16)

  • 8:30 US Empire State Manufacturing Index. Estimate 18.5. Actual 17.7
  • 18:50 Japanese Core Machinery Orders. Estimate -1.1%

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, January 16, 2018

USD/JPY January 16 at 11:30 EDT

Open: 110.54 High: 110.98 Low: 110.48 Close: 110.76

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.21 109.11 110.10 111.53 112.57 113.55

USD/JPY posted slight gains in the Asian session. The pair ticked lower in the European session and is showing limited movement in North American trade

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

Current range: 110.10 to 111.53

Further levels in both directions:

  • Below: 110.10, 109.11 and 108.21
  • Above: 111.53, 112.57, 113.55 and 114.59

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (60%), indicative of trader bias towards USD/JPY continuing to move lower.

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.