USD/JPY – Yen Soars as US Treasuries Drag Down Dollar

The Japanese yen has posted sharp gains in the Tuesday session. In North American trade, USD/JPY is trading at 107.53, down 1.04% on the day. In the European session, the pair dropped to its lowest level since early September. On the release front, Japanese PPI slipped to 2.7% in January, down from 3.1% a month earlier. This matched the estimate. Later in the day, Japan releases Preliminary GDP for the fourth quarter, with the estimate standing at 0.2%. On Wednesday, the US releases inflation and retail sales data. Traders should be prepared for some movement from the pair during the North American session.

The turbulence in global stock markets has been a boon for the Japanese yen. USD/JPY dropped 1.2% last week, and is down another 1% on Tuesday. The Japanese currency has attracted nervous investors looking for safe haven assets, and on Monday, US 10-year treasury bonds dropped, as the US stock market stabilized. This sent the US dollar sharply lower against the yen. If treasuries continue to lose ground on Tuesday, the yen’s rally could continue.

One of the catalysts of last week’s stock market correction was investor concern that higher inflation could lead to more interest rate hikes. This holds true for the Federal Reserve and the Bank of England, both of which might accelerate the pace of rate hikes during 2018. However, Japanese inflation remains well below the BoJ target of around 2 percent, and there is no pressure on the BoJ to raise rates. This was underscored on Monday, as the Japanese Producer Price Index (PPI) slowed for a second straight month, to 2.7%. This marks the lowest gain in PPI since July.

 

USD/JPY Fundamentals

Monday (February 12)

  • 18:50 Japanese PPI. Estimate 2.7%. Actual 2.7%

Tuesday (February 13)

  • 00:58 Japanese Preliminary Machine Tool Orders. Actual 48.8%
  • 6:00 US NFIB Small Business Index. Estimate 106.2. Actual 106.9
  • 8:00 US FOMC Member Loretta Mester Speaks
  • 18:50 Japanese Preliminary GDP Price Index. Estimate 0.0%
  • 18:50 Japanese Preliminary GDP. Estimate 0.2%

Wednesday (February 14)

  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US Retail Sales. Estimate 0.5%

*All release times are EST

*Key events are in bold

 

USD/JPY for Tuesday, February 13, 2018

USD/JPY February 13 at 11:15 EST

Open: 108.65 High: 108.78 Low: 107.42 Close: 107.53

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
105.53 106.64 107.29 108.21 109.11 110.10

USD/JPY posted slight losses in the Asian session and sharper losses in European trade. The pair is flat in North American trade

  • 107.29 has switched to a support role following sharp losses by USD/JPY on Tuesday
  • 108.21 is the next resistance line

Current range: 107.29 to 108.21

Further levels in both directions:

  • Below: 107.29, 106.64 and 105.53
  • Above: 108.21, 109.11, 110.10 and 111.53

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight movement towards long positions. Currently, long positions have a majority (72%), indicative of trader bias towards USD/JPY reversing directions and moving 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.

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.