USD/JPY – Japanese yen takes pause after rough week

USD/JPY is showing little movement at the start of the trading week. In Monday’s North American session, the pair is trading at 111.81, down 0.06% on the day. On the release front, there are no major indicators out of Japan or the United States. On Tuesday, the U.S. releases ISM Non-Manufacturing PMI.

The yen suffered another rough week, as USD/JPY climbed 1.0 percent. The catalyst for the yen’s drop was increased risk appetite, as investors are increasingly confident that the U.S and China will reach a deal on their trade dispute, which has rocked the global economy. If the positive momentum continues, President Trump and Chinese President Xi could sign a trade agreement in late March. Still, it’s unclear what the agreement will look like, as the sides have been very tight-lipped. Investors will be most concerned as to whether U.S. tariffs on Chinese products would be eliminated immediately or phased out over time. If speculation rises that a breakthrough is imminent, the safe-haven yen could fall sharply.

The Bank of Japan has persisted with its ultra-accommodative monetary policy, but inflation levels have remained well below the target of around 2 percent. Annual core consumer inflation was just 0.8% in January, as the BoJ has been unable to boost inflation to its target of around 2%. The lack of success on the inflation front has led to dissenting voices calling for change. Last week, BoJ member Goushi Kataoka called on the bank to increase stimulus in order to achieve its inflation target. However, unless BoJ Governor Kuroda decides to take stronger easing steps, current monetary policy will remain in place and inflation will stay low. This means that any interest rate hikes are unlikely for the foreseeable future.

Stocks get the green light from trade talks

Trade talk hopes suggest positive start for Europe

USD/JPY Fundamentals

Sunday (March 3)

• 18:50 Japanese Monetary Base. Estimate 4.5%. Actual 4.6%

Monday (March 4)

• 10:00 U.S. Construction Spending. Estimate 0.2%. Actual -0.6%
  
• 10:00 US 10-year Bond Auction

Tuesday (March 5)

• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.4

*All release times are EST

*Key events are in bold

USD/JPY for Monday, March 4, 2019

USD/JPY March 4 at 11:00 EST

Open: 111.90 High: 112.02 Low: 111.76 Close: 111.81

USD/JPY Technical

In the Asian session, USD/JPY ticked lower but then recovered. This trend was repeated in European trade. USD/JPY is steady in the North American session

• 110.90 is providing support
• 112.16 is the next resistance line
• Current range: 110.90 to 112.16

Further levels in both directions:

• Below: 110.90, 110.28, 109.37 and 108.11
• Above: 112.16, 112.93 and 113.70

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