USD/JPY – Yen Rally Continues, Japanese Inflation and BOJ Minutes Ahead

The Japanese yen continues to rally this week. In Thursday’s North American session, USD/JPY is trading at 108.70, down 0.48% on the day. On the release front, unemployment claims climbed to 233 thousand, but managed to beat the estimate of 236 thousand. New Home Sales slowed to 625 thousand, well off the estimate of 679 thousand. Later in the day, Japan releases Tokyo Core CPI and the BoJ Minutes, so we could see some movement from the yen. On Friday, there are two key releases in the US – Advance GDP for the fourth quarter and durable goods reports.

The streaking yen continues to make headway against the US dollar. The Japanese currency has gained 1.9% this week, and the dollar has dropped below the 109 level for the first time since September 2017. The greenback is under sustained pressure from its major rivals. On Wednesday, US Treasury Secretary Steven Mnuchin didn’t do the dollar any favors by stating that “obviously a weaker dollar is good for us as it relates to trade and opportunities”. The yen received a further boost this week when negative sentiment over global equity markets increased demand for safe haven assets.

There were no surprises from the Bank of Japan, which released a monetary policy statement earlier in the week. As expected, the BoJ held interest rates in negative territory, at -0.10%. The monetary policy statement noted that policymakers expect the economy to continue to show modest expansion, and that the BoJ would maintain current qualitative and quantitative monetary easing until consumer inflation hits the 2 percent target. Recently, there has been talk of the BoJ tightening its policy, given the rebound in the economy. However, BoJ Governor Kuroda has taken pains to reiterate that the Bank will not be changing its ultra-accommodative monetary policy anytime soon. In a quarterly review, the BoJ made no changes to its economic and inflation projections, and reiterated its forecast that inflation will reach the 2 percent target in the 2019-2020 fiscal year.

USD/JPY Fundamentals

Thursday (January 25)

  • 8:30 US Unemployment Claims. Estimate 236K. Actual 233K
  • 10:00 US New Home Sales. Estimate 679K. Actual 625K
  • 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.6%
  • 10:30 US Natural Gas Storage. Estimate -270B. Actual -288B
  • 18:30 Japanese National Core CPI. Estimate 0.9%
  • 18:30 Japanese Tokyo Core CPI. Estimate 0.8%
  • 18:50 BoJ Monetary Policy Meeting Minutes
  • 18:30 Japanese Services Producer Price Index. Estimate 0.8%

Friday (January 26)

  • 8:30 US Advance GDP. Estimate 3.0%
  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Advance GDP Price Index. Estimate 2.3%
  • 8:30 US Durable Goods Orders. Estimate 0.9%

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, January 25, 2018

USD/JPY January 25 at 11:10 EDT

Open: 109.22 High: 109.47 Low: 108.59 Close: 108.70

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.14 107.29 108.21 109.11 110.10 111.53

USD/JPY edged higher in the Asian session. In European trade, the pair posted small gains but then retracted. USD/JPY is moving lower in the North American session

  • 108.21 is providing support
  • 109.11 has switched to a resistance role after losses by USD/JPY

Current range: 108.21 to 109.11

Further levels in both directions:

  • Below: 108.21, 107.29 and 106.14
  • Above: 109.11, 110.10, 111.53 and 112.57 and 113.

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement this week. Currently, long positions have a majority (65%), 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.