USD/JPY – Japanese yen steady ahead of consumer income report

The Japanese yen continues to have a quiet week. In Tuesday’s North American session, USD/JPY is trading at 108.48, down 0.23% on the day. In Japan, consumer confidence dipped to 42.7, shy of the estimate of 42.8 points. Later in the day, Average Cash Earnings, a key gauge of consumer spending, is expected to drop to 1.3%. In the U.S., JOLTS Job Openings was unexpectedly soft, dropping to 6.83 million. This marked a four-month low. On Wednesday, the Federal Reserve releases the minutes of its December meeting, when it raised interest rates.

After strong gains last week, the yen has taken a pause. Risk appetite took a hit after Apple stunned the markets with a revenue warning, and panicky investors responded by snapping up the safe-haven yen. However, investor optimism returned after dovish comments from Fed Chair Jerome Powell on Friday, who made a concentrated effort to ease the volatility which has rocked the markets in recent weeks. The markets had dropped sharply after the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance with a more cautious outlook over rate policy, saying any rate decisions would be done prudently and with patience.

The Fed seems to be lowering expectations for additional rate hikes. Recent Fed forecasts have indicated two rate increases in 2019, but on Monday, Atlanta Fed President Raphael Bostic said that the economy would need only one rate hike. Some analysts have gone further, projecting a rate cut in 2019, which has put a chill on sentiment towards the U.S. dollar.

Will we see an easing of tensions in the U.S-China trade spat? Investors are pinning hopes on the outcome of this week’s meeting between U.S and Chinese officials. The teams are holding two days of talks in China, in an effort to reduce global trade tensions. The ongoing trade war has rocked equity markets, which had their worst year in 2018 since the 2008 financial crisis. The world’s two largest economies have engaged in tit-for-tat tariffs, and President Trump has threatened to impose additional tariffs on March 1 if the sides don’t reach a deal. If this set of talks points to progress, traders can expect risk appetite to improve, which could put a cap on the yen’s impressive rally.

The Powell “Put” continues to resonate

A bit of the feel-good factor has temporarily abated

USD/JPY Fundamentals

Tuesday (January 8)

  • 00:07 Japanese Consumer Confidence. Estimate 42.8. Actual 42.7
  • 6:00 US NFIB Small Business Index. Estimate 103.1. Actual 104.4
  • 10:00 US JOLTS Job Openings. Estimate 7.07M. Actual 6.89M
  • 15:00 US Consumer Credit. Estimate 17.3B
  • 19:00 Japanese Average Cash Earnings. Estimate 1.3%
  • 21:00 US President Trump Speaks

Wednesday (January 9)

  • 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, January 8, 2019

USD/JPY January 8 at 11:40 EST

Open: 108.72 High: 109.09 Low: 108.46 Close: 108.48

USD/JPY Technical

S3 S2 S1 R1 R2 R3
105.66 106.88 108.11 109.37 110.28 110.95

USD/JPY has been marked by choppy trade. The pair posted small losses in the Asian session but recovered in European trade. In the North American session, the pair ticked higher, but has reversed directions and moved lower

  • 108.11 is providing support
  • 109.37 is the next resistance line
  • Current range: 108.11 to 109.37

Further levels in both directions:

  • Below: 108.11, 106.88, 105.66 and 104.64
  • Above: 109.37, 110.28 and 110.95

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.