USD/JPY – Dollar Drops Below 106, US Jobless Claims Steady

The Japanese yen continues to post gains. In Thursday’s North American session, USD/JPY is trading at 105.96, down 0.34% on the day. In the US, unemployment claims dropped to 226 thousand, just below the estimate of 226 thousand. Manufacturing reports were mixed. The Philly Fed Manufacturing Index dropped to 22.3, missing the forecast of 23.1 points. There was better news from the Empire State Manufacturing Index, which jumped to 22.5, crushing the estimate of 14.9 points. This marked a 5-month high. Japan will release Revised Industrial Production, with the markets braced for a sharp decline of 6.6%. On Friday, the US releases three key events – Building Permits, Housing Starts and Preliminary UoM Consumer Sentiment.

With the Japanese economy continuing to show improvement, investors are carefully following the Bank of Japan, looking for hints regarding any change in monetary policy. Earlier in the week, the BoJ released the minutes of its January policy meeting, but the markets were more interested in what Bank of Japan Governor Haruhiko Kuroda had to say. The minutes indicated that some policymakers expressed concern about the drawbacks of the Bank’s massive monetary stimulus program, such as hurting the profits of financial institutions. However, most members were of the view that the Bank should continue its radical easing stance. Speaking after the release of the minutes, Kuroda said he was confident that the BoJ would exit its ultra accommodative monetary policy, but qualified his remarks by adding that it was too early to get into specifics, given that inflation remained well below the Bank’s target. Kuroda is playing his cards very cautiously, using the E- word (exit), while at the same time saying that it is much too early to discuss any change in policy until inflation moves closer to the target of around 2 percent.

The Federal Reserve is widely expected to raise interest rates next week, which would mark the first hike of 2018. According to the CME Group, the odds of a quarter-point raise stand at 89 percent. What can we expect from the Fed during the year? The pressing question is how many rate hikes will we see in 2018. The current Fed projection remains at three hikes, but the superb nonfarm payrolls report last week has raised speculation that the Fed could accelerate the pace to four hikes, which would be good news for the US dollar. Investors will be keeping a close eye on key US data, especially inflation indicators. If these numbers improve, we’re likely to see four rate hikes in 2018.

Thursday March 15: Five things the markets are talking about

USD/JPY Fundamentals

Thursday (March 15)

• 8:30 US Empire State Manufacturing Index. Estimate 14.9. Actual 22.5
• 8:30 US Philly Fed Manufacturing Index. Estimate 23.1. Actual 22.3
• 8:30 US Unemployment Claims. Estimate 227K. Actual 226K
• 8:30 US Import Prices. Estimate 0.3%. Actual 0.4%
• 10:00 US NAHB Housing Market Index. Estimate 72
• 10:30 US Natural Gas Storage. Estimate -99B
• 16:00 US TIC Long-Term Purchases. Estimate 35.9B

Friday (March 16)

• 00:30 Japanese Revised Industrial Production. Estimate -6.6%
• 8:30 US Building Permits. Estimate 1.33M
• 8:30 US Housing Starts. Estimate 1.30M
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 99.6
• 10:00 US JOLTS Job Openings. Estimate 5.85M 

*All release times are EST

*Key events are in bold

USD/JPY for Thursday, March 15, 2018

USD/JPY March 15 at 10:15 EST

Open: 106.33 High: 106.36 Low: 105.79 Close: 105.96

USD/JPY Technical

USD/JPY edged lower in the Asian session. In the European session, the pair posted small gains but then retracted. USD/JPY pair is showing little movement in the North American session

• 105.53 is providing support
• 106.64 is the next resistance line

Further levels in both directions:

• Below: 105.53, 104.32 and 103.09
• Above: 106.64, 107.29, 108.00 and 109.11
• Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight movement towards short positions. Currently, long positions have a majority (66%), 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.