USD/JPY – Yen Edges Above 107 Line in Holiday Trading

USD/JPY is showing limited movement on Thursday, as the pair trades at the 107.30 line in the European session. The sole Japanese release on the calendar is Monetary Base. In the US, today’s key event is Unemployment Claims, with the indicator expected to rise slightly to 261K. We could see stronger movement from USD/JPY on Friday, as the US releases three key employment indicators – Average Hourly Earnings, the Unemployment Rate and Nonfarm Payrolls.

Japanese markets were closed for most of the week, but USD/JPY continued to move downwards and is down 100 points this week, as the yen trades above the 107 level. Last week, the yen jumped 550 points as the Bank of Japan surprised the markets and concluded a policy meeting without announcing any easing measures. In remaining on the sidelines, the BoJ sent a strong message to the markets that it won’t be rushed into more monetary action and any further easing will be data-dependent. The BoJ remains concerned about the strengthening yen and officials have issued stern warnings that it will not tolerate currency manipulations. However, it’s unlikely that tough talk will succeed in deterring speculators, as the yen has climbed sharply in 2016 and the symbolic 100 level looms closer.

ADP Nonfarm Payrolls kicked off a string of US job numbers this week, but the indicator was well below expectations. The indicator dropped sharply in April to 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at Unemployment Claims later on Thursday and the all-important Nonfarm Payrolls on Friday. The employment picture has been a bright spot in the US economy, as unemployment remains at very low levels and Nonfarm Payrolls have been above the 200-thousand threshold. Despite the robust labor market, however, consumer confidence and spending has not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

After posting gains last week, US crude has reversed directions and is trading close to $44. The worldwide glut of oil continues to weigh on oil prices, although prices have moved higher in recent weeks. An oil summit in Qatar last month ended without an agreement on capping production, leaving room for prices to drop. OPEC members will meet on June 2, and will likely revisit the issue of freezing production in order to raise prices. US crude remains under pressure, as Crude Oil Inventories posted a sharp gain of 2.8 million, its highest surplus in three weeks. US crude had shown gains earlier on Wednesday, as a large forest fire in the Alberta oil sand region has disrupted production in the region.

USD/JPY Fundamentals

Thursday (May 5)

  • 7:30 US Challenger Job Cuts
  • 8:30 US Unemployment Claims. Estimate 261K
  • 10:30 US  Natural Gas Storage. Estimate 69B
  • 11:30 US FOMC Member James Bullard Speaks
  • 19:15 US FOMC Member James Bullard Speaks
  • 19:50 Japanese Monetary Base. Estimate 29.3%

Upcoming Key Events

Friday (May 6)

  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 203K
  • 8:30 US Unemployment Rate. Estimate 5.0%

*Key releases are highlighted in bold

*All release times are EDT

USD/JPY for Thursday, May 5, 2016

USD/JPY May 5 at 7:00 EDT

Open: 106.94 Low: 106.90 High: 107.40 Close: 107.28

USD/JPY Technical

S3 S2 S1 R1 R2 R3
104.12 105.18 106.19 107.57 108.37 109.87
  • USD/JPY has posted small gains in the Asian and European sessions.
  • 107.57 is a weak resistance line
  • 106.19 is providing strong support
  • Current range: 106.19 to 107.57

Further levels in both directions:

  • Below: 106.19, 105.18, 104.12 and 103.09
  •  Above: 107.57, 108.37 and 109.87

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Thursday, consistent with the lack of movement from USD/JPY. Long positions command a strong majority (71%). This is indicative of strong trader bias towards USD/JPY continuing to move to higher ground.

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 and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.