USD/JPY – Japanese yen edges higher, BoJ rate statement next

USD/JPY has edged lower on Tuesday. In the North American session, the pair is trading at 109.43, down 0.23% on the day. On the release front, Existing Home Sales was unexpectedly weak, dropping to 4.99 million and missing the estimate of 5.27 million. The indicator fell short of the 5.0-million threshold for the first time since November 2015. In Japan, BoJ Core Inflation edged lower to 0.4%, shy of the estimate of 0.5%. Later in the day, the Bank of Japan releases a rate statement.

No surprises are expected from the Bank of Japan, which winds up a policy meeting on Tuesday. Policymakers are expected to hold the course and continue the ultra-accommodative policy. The Japanese economy has been showing modest growth, and weak inflation means there is little pressure to raise interest rates. Still, policymakers have major headaches, including the global trade war and further signs that the Chinese economy is slowing down. Japan’s export and manufacturing sectors have weakened, and if the global economy takes a downturn, Japan could be hit with a recession. A negative side effect to prolonged low interest rates is that financial institutions have seen their profits fall, forcing some of them to make questionable loans in order to recoup lost profits. The BoJ has acknowledged the problem, but is unlikely to change course in the near future.

On Monday, the well-respected International Monetary Fund revised downwards its global growth forecast, but raised its forecast for Japan’s economy. With the U.S-China taking its toll on economies around the globe, the IMF’s prognosis should not come as a surprise. In October, the IMF projected growth of 3.7%, but this has now been revised to 3.5%. IMF head Christine Lagarde said that the world’s economy continues to expand, but “it is facing significantly higher risks”. As for Japan, the IMF raised its forecast for 2019 to 1.1%, up from 0.9% in October.

Appetite for market risk is very low

Profit taking seen in light trading

USD/JPY Fundamentals

Tuesday (January 22)

  • 00:00 BoJ Core CPI. Estimate 0.5%. Actual 0.4%
  • 10:00 US Existing Home Sales. Estimate 5.27M. Actual 4.99M
  • 18:50 Japanese Trade Balance. Estimate -0.29T
  • Tentative – BoJ Outlook Report
  • Tentative – BoJ Monetary Policy Statement
  • Tentative – BoJ Policy Rate. Estimate -0.10%
  • 23:30 Japanese All Industries Activity. Estimate -0.4%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, January 22, 2019

USD/JPY January 22 at 10:25 EST

Open: 109.67 High: 109.70 Low: 109.33 Close: 109.43

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.88 108.11 109.37 110.28 110.95 111.83

USD/JPY ticked lower in the Asian session and was flat in the European session. The pair is showing little movement in the North American session.

  • 109.37 was tested earlier in support. It remains a fluid line
  • 110.28 is the next resistance line
  • Current range: 109.37 to 110.28

Further levels in both directions:

  • Below: 109.37, 108.11, 106.88 and 105.66
  • Above: 110.28, 110.95 and 111.83

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.