USD/JPY – Yen Rally Continues as Dollar Broadly Weaker

The Japanese yen has posted considerable gains in Thursday trade. In the North American session, USD/JPY is trading at 105.41, down 0.62% on the day. Japanese data was a disappointment. Flash Manufacturing PMI slowed to 53.2, missing the estimate of 54.3 points. As well, All Industries Activity declined 1.8%, shy of the estimate of -1.7%. Later in the day, Japan releases National Core CPI, which is expected to tick higher to 1.0%. In the US, unemployment claims rose to 229 thousand, higher than the forecast of 225 thousand. On Friday, the US releases durable goods and housing reports.

On Wednesday, the Federal Reserve raised rates for the first time this year, in a move that was widely expected. The rate increase of a quarter-point brings the benchmark rate to a range between 1.50% and 1.75%. The markets were looking for any clues with regard to the pace of rate hikes in 2018 – currently the Fed is projecting three hikes, but a robust US economy could push the Fed to press the rate trigger four times. The rate statement did not directly address the issue, but there was a refreshing lack of Fedspeak from policymakers, who said that “the economic outlook has strengthened in recent months”. This phrase has not been used in previous rate statements, and if Fed policymakers reiterate positive sentiment towards the economy, could push the US dollar to higher ground.

There are some new faces in the senior management of the Bank of Japan, but the “hold the course” mantra remains the  same. On Tuesday, two new deputy governors, Masayoshi Anamiya and Masazumi Wakatabe, were elected to 5-year terms. On Wednesday, Anamiya said that “conceptually and theoretically, we haven’t hasn’t ruled out the possibility of adjusting the yield curve”, leaving the door open to raising rates even if inflation remains shy of the 2 percent target. However, Anamiya added that the Bank has not reached the point of having to make such a decision. In other words, the markets should not expect any changes in the bank’s ultra-accommodative policy for the foreseeable future.

USD/JPY Fundamentals

Wednesday (March 21)

  • 8:30 Japanese Flash Manufacturing PMI. Estimate 54.3. Actual 53.2

Thursday (March 22)

  • 00:30 Japanese All Industries Activity. Estimate -1.7%. Actual -1.8%
  • 8:30 US Unemployment Claims. Estimate 225K. Actual 229K
  • 9:00 US HPI. Estimate 0.4%. Actual 0.8%
  • 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.7
  • 9:45 US Flash Services PMI. Estimate 55.9. Actual 54.1
  • 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.6%
  • 10:30 US Natural Gas Storage. Estimate -88B. Actual -86B
  • 19:30 Japanese National Core CPI. Estimate 1.0%

Friday (March 23)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Durable Goods Orders. Estimate 1.6%
  • 10:00 US New Home Sales.  Estimate 621K

*All release times are EST

*Key events are in bold

USD/JPY for Thursday, March 22, 2018

USD/JPY March 22 at 11:30 EST

Open: 106.54 High: 106.55 Low: 106.08 Close: 105.41

USD/JPY Technical

S3 S2 S1 R1 R2 R3
101.84 103.09 104.32 105.53 106.64 107.29

USD/JPY edged higher in the Asian and European sessions. The pair has posted slight losses in North American trade

  • 104.32 is providing support
  • 105.53 has switched to a resistance line after strong losses by USD/JPY

Further levels in both directions:

  • Below: 104.32, 103.09 and 101.84
  • Above: 105.53, 106.64, 107.29 and  108.00
  • Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Thursday session. Currently long positions have a majority (70%), indicative of trader bias towards USD/JPY continuing to head to lower ground.

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.