USD/JPY – Yen Gains Ground as BoJ Cautiously Optimistic

The Japanese yen has posted gains in the Tuesday session. Currently, USD/JPY is trading at 110.33, down 0.46% on the day. On the release front, the Bank of Japan maintained interest rates at -0.10% at its policy meeting. Later in the day, Japan releases Trade Balance and Manufacturing PMI. In the US, the sole event of the day, Richmond Manufacturing Index, posted a 3-month low. The indicator slowed to 14, well off the estimate of 20 points. On Wednesday, the US releases Existing Home Sales.

As expected, the Bank of Japan held interest rates in negative territory, at -0.10%. The monetary policy statement noted that the economy should continue to show modest expansion, and that the BoE would maintain current qualitative and quantitative monetary easing until consumer inflation hits the 2 percent target. Recently, there has been talk of the BoJ tightening its policy, given the rebound in the economy. However, BoJ Governor Kuroda has taken pains to reiterate that the Bank will not be changing its ultra-accommodative monetary policy anytime soon. In a quarterly review, the BoJ made no changes to its economic and inflation projections, and reiterated its forecast that inflation will reach the 2 percent target in the 2019-2020 fiscal year.

The US government shutdown is over, after just three days. On Monday, the Senate voted 266-150 to extend funding until February 8. This stopgap measure will enable the government to provide services during that time, but the parties will still have to hammer out a longer-term agreement on funding the government. The Democrats held up a funding bill last week, in order to force the Republicans to the table over illegal immigration. The Republicans have promised to hold a vote on this issue, but many Democratic lawmakers remain skeptical that President Trump and the Republicans will deal in good faith over immigration.

USD/JPY Fundamentals

Monday (January 22)

• 22:14 BoJ Monetary Policy Statement
• 22:14 BoJ Outlook Report
• 22:14 BoJ Policy Rate. Estimate -0.10%. Actual -0.10%
• 23:30 Japanese All Industries Activity. Estimate 0.9%. Actual 1.0%

Tuesday (January 23)

• 1:30 BoJ Press Conference
• 9:59 US Richmond Manufacturing Index. Estimate 19. Actual 14
• 18:50 Japanese Trade Balance. Estimate 0.27T
• 19:30 Japanese Flash Manufacturing PMI. Estimate 54.3

Wednesday (January 24)

• 10:00 US Existing Home Sales. Estimate 5.72M

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, January 23, 2018

USD/JPY January 23 at 11:20 EDT

Open: 110.94 High: 111.18 Low: 110.25 Close: 110.42

USD/JPY Technical

USD/JPY inched lower in the Asian session. In the European session, the pair moved higher but then retracted. USD/JPY has posted small gains in North American trade

• 110.10 is a weak support line
• 111.53 is the next resistance line

Current range: 110.10 to 111.53

Further levels in both directions:

• Below: 110.10, 109.11 and 108.21
• Above: 111.53, 112.57, 113.55 and 114.59

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Tuesday session. Currently, long positions have a majority (63%), indicative of trader bias towards USD/JPY continuing to move lower.

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.