USD/JPY – Dollar Punches Past 109 Yen as US Bond Yields Climb

The yen continues to lose ground against the robust US dollar. In the Wednesday session, USD/JPY is trading at 109.27, up 0.42% on the day. The pair has posted gains in 6 consecutive sessions, climbing 2.2% during that period. On the release front, Japanese All Industries Activity rebound with a gain of 0.4%, after a decline of 1.8% a month earlier. Still, this missed the estimate of 0.6%. There are no major US events on the schedule. Thursday will be much busier, with a host of key indicators. The US releases durable goods orders and unemployment claims. Japan will publish retail sales and CPI, and the BoJ will issue a policy statement.

The US dollar continues to climb against its rivals, buoyed by rising yields on US bonds, which have hit 4-year highs. On Wednesday, 10-year US Treasury notes have risen to 3.015%, and 2-year bonds have increased to 2.504 percent. With inflation appearing to be on the rise, there are stronger expectations that the Federal Reserve will raise rates four times in 2018, which is good news for the US dollar. With oil pushing above $70 a barrel, there are concerns that inflation will rise, which has pushed bond prices lower and yields upwards. The US currency has also benefited from a reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.

The Japanese economy continues to expand, but inflation has lagged behind growth and remains well below the Bank of Japan’s target of around 2 percent. The markets have been speculating that stronger economic conditions might cause the BoJ to re-examine its ultra-accommodative monetary policy. However, on Monday, BoJ Governor Haruhiko Kuroda poured cold water over such sentiment, stating that in order to reach its inflation target, “the Bank of Japan must continue very strong accommodative monetary policy for some time”. The BoJ will issue an inflation forecast on Friday, with the bank expected to reiterate that the inflation target will be reached in fiscal year 2019. Kuroda’s dovish statement can be seen as an attempt to curb volatility in the yen following the release of the inflation forecast.

Dollar Yields to Higher Rates

USD/JPY Fundamentals

 Wednesday (April 25)

  • 00:30 Japanese All Industries Activity. Estimate 0.6%. Actual 0.4%
  • 10:30 US Crude Oil Inventories. Estimate -1.6M

Thursday (April 26)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Durable Goods Orders. Estimate 1.6%
  • 8:30 US Unemployment Claims. Estimate 230K
  • 19:30 Tokyo Core CPI. Estimate 0.8%
  • 19:30 Japanese Retail Sales. Estimate 1.5%
  • Tentative – BoJ Policy Statement
  • Tentative – Monetary Policy Statement
  • Tentative – BoJ Outlook Report

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, April 25, 2018

USD/JPY April 25 at 10:55 DST

Open: 108.82 High: 109.35 Low: 108.79 Close: 109.27

USD/JPY Technical

S3 S2 S1 R1 R2 R3
107.29 108.00 108.89 110.11 111.22 112.06

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

  • 108.89 is providing support
  • 110.11 is the next resistance line

Further levels in both directions:

  • Below: 108.89, 108.00, 107.29 and 106.64
  • Above: 110.11, 111.22 and 112.06
  • Current range: 108.89 to 110.11

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (62%), indicative of trader bias towards USD/JPY continuing to move to higher 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.