USD/JPY – Japanese Yen Dips, BoJ Removes Inflation Timeframe

The Japanese yen has lost ground in the Monday session, erasing the gains which marked the Friday session. In North American trade, USD/JPY is trading at 109.39, up 0.31% on the day. On the release front, key US indicators were mixed. Personal Spending improved to 0.4%, matching the forecast. This marked a 3-month high. The news was not as positive from the housing sector, as Pending Home Sales dropped to 0.4%, down sharply from 3.1% in the previous release. Later in the day, Japanese Final Manufacturing PMI is expected to edge up to 53.3 points. On Tuesday, the key event is ISM Manufacturing PMI.

On Friday, the Bank of Japan maintained its monetary policy but surprised the markets by ditching its target timeframe for reaching its inflation target. Governor Haruhiko Kuroda stated that the removal of the timeframe would prevent market speculation on additional easing each time the BoJ pushed back the timeframe for reaching its inflation goal. The bank has pushed back its inflation timeframe six times, due to weak inflation. In his remarks, Kuroda said that the reluctance of the business sector to raise wages continued to hamper the inflation outlook. In its quarterly review, the bank projected an inflation rate of 1.8% in fiscal 2019.

US indicators ended the week with the first GDP report for the first quarter. Advance GDP posted a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its major rivals, including the Japanese yen.

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USD/JPY Fundamentals

Monday (April 30)

  • 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
  • 8:30 US Personal Spending. Estimate 0.4%. Actual 0.4%
  • 8:30 US Personal Income. Estimate 0.4%. Actual 0.3%
  • 9:45 US Chicago PMI. Estimate 58.2. Actual 57.6
  • 10:00 US Pending Home Sales. Estimate 0.6%. Actual 0.4%
  • 20:30 Japanese Final Manufacturing PMI. Estimate 53.3

Tuesday (May 1)

  • 10:00 US ISM Manufacturing PMI. Estimate 58.6

*All release times are DST

*Key events are in bold

USD/JPY for Monday, April 30, 2018

USD/JPY April 30 at 10:40 DST

Open: 109.05 High: 109.43 Low: 109.02 Close: 109.38

USD/JPY Technical

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

USD/JPY posted small gains in the Asian session and has recorded further gains in European trade. The pair is steady in the North American session

  • 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

In the Monday session, USD/JPY ratio is showing long positions with a majority (58%). This is 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.