USD/JPY – Japanese Yen Edges Lower as Japanese Manufacturing PMI Dips

The Japanese yen has ticked lower in the Wednesday session. In North American trade, USD/JPY is trading at 107.58, up 0.23% on the day. In Japan, Flash Manufacturing PMI dipped to 54.2, missing the estimate of 55.2 points. All Industries Activity slowed to 0.5%, matching the forecast. In the US, the key event is the Federal Reserve minutes from the January meeting. Earlier, Existing Home Sales disappointed, dropping to 5.38 million. This was well short of the estimate of 5.61 million. On Thursday, the US releases unemployment claims and Japan will release two inflation reports.

The yen posted sharp gains last week, as the currency gained 2.5% against the retreating dollar. However, the US dollar has rebounded this week and climbed to 107.90 earlier on Wednesday, marking a 1-week high. Have investors regained their appetite for risk? US markets have gained ground this week, pushing the US dollar higher. The stock markets could continue to set the direction for the safe-haven yen – if the markets remain in green territory, the yen could continue to lose ground.

The Bank of Japan is holding a steady course when it comes to top management. Governor Harohiko Kuroda has been reappointed to another 5-year term, the first time that a BoJ governor has been re-elected to a second term in 60 years. The move is a clear message from the Bank that it is no rush to make any change to the massive stimulus program, a key component of Abenomics. Kuroda has made it a priority to raise inflation, but this has proven a daunting task, as inflation is still below of the BoJ’s inflation target of 2%. In this period of strong volatility in the currency markets, Kuroda’s re-election may have a calming effect on the markets. What’s next for the BoJ? The yen has jumped 4.9% in 2018, and if the rise continues, policymakers could consider further easing in order to curb the yen’s value and protect the export sector, which has improved due to stronger global demand.

The Federal Reserve will be in the spotlight on Wednesday, with the release of the minutes from the January meeting, the last to have been chaired by Janet Yellen. The markets will be looking for hints regarding future rate policy, and any inkling of plans to raise interest rates more than three times in 2018 could trigger volatility in the currency markets as well as stock markets. Recent US numbers have been strong, and inflation indicators have been pointing upwards. This has raised concerns that the Fed may accelerate its pace of hikes, which triggered a sharp correction in global stock markets. The new chair of the Fed, Jerome Powell has tried to reassure the markets that the Fed is monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

USD/JPY Fundamentals

Tuesday (February 20)

  • 19:30 Japanese Flash Manufacturing PMI. Estimate 55.2. Actual 54.0
  • 23:30 Japanese All Industries Activity. Estimate 0.5%. Actual 0.5%

Wednesday (February 21)

  • 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.9
  • 9:45 US Flash Services PMI. Estimate 53.8. Actual 55.9
  • 10:00 US Existing Home Sales. Estimate 5.61M. Actual 5.38M
  • 14:00 US FOMC Meeting Minutes

Thursday (February 22)

  • 8:30 US Unemployment Claims. Estimate 230K
  • 18:30 Japanese National Core CPI. Estimate 0.8%
  • 18:50 Japanese Services Producer Price Index. Estimate 0.8% 

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, February 21, 2018

USD/JPY February 21 at 11:10 EST

Open: 107.33 High: 107.91 Low: 107.28 Close: 107.58

USD/JPY Technical

S3 S2 S1 R1 R2 R3
105.53 106.64 107.29 108.00 109.11 110.48

USD/JPY posted strong gains in the Asian session but gave up most of these gains in European trade. The pair has inched higher in the North American session

  • 107.29 was tested earlier in support and remains a weak line
  • 108.00 is the next resistance line

Current range: 107.29 to 108.00

Further levels in both directions:

  • Below: 107.29, 106.64, 105.53 and 104.32
  • Above: 108.00, 109.11 and 110.48

OANDA’s Open Positions Ratios

USD/JPY ratio is showing gains in short positions. Currently, long positions have a majority (70%), indicative of 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.

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.