USD/JPY – Japanese yen gains ground after FOMC minutes

The Japanese yen has posted slight losses on Thursday, after considerable gains on Wednesday. In the North American session, USD/JPY is trading at 108.25, up 0.09% on the day. In economic news, unemployment claims dropped sharply to 216 thousand, below the forecast of 226 thousand. In Japan, household spending is expected to improve to 0.0% after two straight declines. As well, the current account surplus, which has dropped for six straight months, is expected to narrow to JPY 1.10 trillion. On Friday, the U.S. releases CPI and Core CPI, which should be treated as market-movers.

The U.S. dollar’s retreat continued on Wednesday, after the release of the FOMC minutes of the December meeting. At the meeting, the Fed raised rates for a fourth time in 2018, culminating a very aggressive stance. This was reflected in the rate statement, but then came the thumbs-down from investors, who wanted a more dovish approach, and sent the equity markets into a tailspin. Fed policymakers have since made a sharp U-turn and are sounding much more cautious about future rate hikes. The minutes noted low inflation meant that the Fed can “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. The new dovish stance from the Fed has relieved investors and helped stabilize the stock markets, but has led to broad losses for the U.S. dollar.

Turmoil in the equity markets in recent weeks has been a boon for the Japanese currency, as jittery investors have snapped up the safe-haven currency. The yen climbed 3.4% in December and has added another 1.2% in January, capitalizing on the market plunge last week, after Apple stunned investors by lowering its sales forecast. Even though risk appetite has improved since then, the yen has held on to these gains. Will the rally continue? There appears more upside potential for the yen, as USD/JPY tested the 105 level last week, for the time since March 2018.

Dollar loses its luster, more to come

Winning streak at risk but optimism returning

USD/JPY Fundamentals

Thursday (January 10)

  • 8:30 US Unemployment Claims. Estimate 226K. Actual 216K
  • 10:30 US Natural Gas Storage. Estimate -62B. Actual -91B
  • 12:40 US FOMC Member Bullard Speaks
  • 12:45 US Fed Chair Powell Speaks
  • 13:01 US 30-year Bond Auction
  • 18:30 Japanese Household Spending. Estimate 0.0%
  • 18:50 Japanese Bank Lending. Estimate 2.1%
  • 18:50 Japanese Current Account. Estimate 1.10T
  • 19:00 US FOMC Member Clarida Speaks

Friday (January 11)

  • 00:00 Japanese Economy Watchers Sentiment. Estimate 50.5
  • 8:30 US CPI. Estimate -0.1%
  • 8:30 US Core CPI. Estimate 0.2%

*All release times are EST

*Key events are in bold

USD/JPY for Thursday, January 10, 2019

USD/JPY January 10 at 11:25 EST

Open: 108.16 High: 108.30 Low: 107.77 Close: 108.25

USD/JPY Technical

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

USD/JPY posted small losses in the Asian session and showed limited movement in European trade. The pair has recorded small gains in the North American session

  • 108.11 was tested earlier in support. It remains a weak line
  • 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.