USD/JPY – Japanese yen edges higher, U.S inflation data ahead

USD/JPY has started the week with slight gains. In Monday’s North American session, the pair is trading at 108.31, down 0.19% on the day. It’s a very light day on the release front. The sole Japanese event is M2 Money Supply, which edged up to 2.4%. There are no U.S. indicators, so the yen is likely to remain subdued during the day. On Tuesday, the U.S. releases PPI reports.

Risk appetite has improved of late, and the yen rally paused last week, as investors sought out risk assets rather than the safe-haven yen. On Monday, China released unexpectedly weak data, with exports down 4.4 percent from a year earlier and imports plunging 7.6 percent. The slowdown in China has taken a toll on corporate profits, with Apple and Jaguar Land Rover posting revenue warnings. Investors will be keeping a close eye on Chinese numbers, and further signs of a slowdown from the world’s second largest economy could raise risk apprehension and bolster the Japanese yen. The yen appears to have further upside potential, as USD/JPY tested the 105 level last week, for the time since March 2018.

The U.S. dollar remains under pressure, as the markets digest the Federal Reserve’s new dovish stance. Fed Chair Powell is now preaching prudence and patience, and the minutes from the Fed’s December meeting, released Wednesday, noted that low inflation levels meant that the Fed could “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. On Thursday, Fed Chair Jerome Powell said he was “very worried” about the massive U.S. debt and reiterated that the Fed would remain patient on monetary policy. Given that further interest rate hikes would hurt the debt burden of corporate borrowers, Powell’s remarks on the debt could be a sign that the Fed will take a pause on rate hikes in the near future, and perhaps even entertain a rate cut this year. The sharp U-turn on monetary policy by the Fed could continue to weigh on the U.S dollar for the near future, and that could spell gains for the yen.

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USD/JPY Fundamentals

Monday (January 14)

  • 18:50 Japanese M2 Money Supply. Estimate 2.4%

Tuesday (January 15)

  • 00:58 Japanese Preliminary Machine Tool Orders
  • 8:30 US PPI. Estimate -0.1%
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US Empire State Manufacturing Index. Estimate 11.6

*All release times are EST

*Key events are in bold

USD/JPY for Monday, January 14, 2019

USD/JPY January 14 at 10:55 EST

Open: 108.51 High: 108.56 Low: 107.99 Close: 108.31

USD/JPY Technical

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

USD/JPY edged lower in the Asian session and showed limited movement in European trade. The pair has posted slight 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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.