USD/JPY – Yen Loses Ground as Oil Prices Recover

USD/JPY has posted slight losses on Tuesday, continuing the downward trend which marked the Monday session. USD/JPY is trading at 109.40 in the European session. On the release front, today’s key event is US Building Permits, with the indicator expecting to improve to 1.20 million. Japan releases Trade Balance, with the surplus expected to widen to JPY 0.45 trillion.

The Japanese yen has enjoyed an impressive run, jumping 10 percent since the start of February. If the upward trend continues, we could see USD/JPY fall to 105 or even lower. The currency’s huge appreciation has become a major headache for BoJ, as a more expensive yen has weakened demand for Japanese exports. This is bad news for the weak Japanese economy which is also facing soft domestic demand. The Japanese government has fought back, sending warnings about possible intervention currency invention in order to curb the yen and combat “currency manipulations”. On Tuesday, Japanese Finance Minister Taro Aso said that he would take “various steps” against rapid moves by the yen. Still, tough talk will likely not be enough to stem the upward trend against speculators who are eyeing the possibility of a yen at 100. Investors have flocked to the safe-haven yen, seeking shelter from a turbulent and uncertain economy. Despite the yen’s impressive upswing in 2016, the currency is widely considered as undervalued against the dollar.

Oil producers failed to reach an agreement at a weekend meeting in Qatar, but they managed to cause plenty of volatility in the currency markets. Oil prices dropped after the inconclusive meeting, but have since recovered. Commodity currencies like the Canadian and Australian dollars followed suit with losses followed by gains. The safe-haven yen has taken the opposite direction and lost 100 points this week, as investors have shown more stomach for risk with oil prices stabilizing since the weekend.

The US economy continues to perform well despite some weak sectors, such as the manufacturing industry. US manufacturers continue to face stiff competition with countries that pay much lower wages, such as China, India, and other Asian countries. With turbulent global economic conditions leading to weaker demand, the manufacturing sector is facing additional challenges. There was some positive news on Friday, as the Empire State Manufacturing Index climbed 9.6 points in April, crushing the estimate of 2.1 points. It was the indicator’s highest level since January 2015. We’ll get a look at the Philly Fed Manufacturing Index, a key manufacturing report, on Thursday. Meanwhile, the UoM Consumer Sentiment dropped to 89.7 points in April, short of the estimate of 91.9 points. Although consumer sentiment remains high, this marked the first time since September that the indicator fell below the symbolic 90 level.

USD/JPY Fundamentals

Tuesday (April 19)

  • 8:30 US Building Permits. Estimate 1.20M
  • 8:30 US Housing Starts. Estimate 1.17M
  • 19:50 Japanese Trade Balance. Estimate 0.45T

Upcoming Key Events

Wednesday (April 20)

  • 14:00 US Existing Home Sales. Estimate 5.29M

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Tuesday, April 19, 2016

USD/JPY April 19 at 6:40 EDT

Open: 109.08 Low: 108.78 High: 109.44 Close: 109.37

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.25 107.57 108.37 109.87 110.66 111.50
  • USD/JPY was flat in the Asian session and has posted gains in European trade
  • There is resistance at 109.87
  • 108.37 has strengthened in resistance as USD/JPY has posted gains
  • Current range: 108.37 to 109.87

Further levels in both directions:

  • Below: 108.37, 107.57, 106.25 and 105.19
  •  Above: 109.87, 110.66 and 111.50

OANDA’s Open Positions Ratio

USD/JPY ratio shows long positions with a strong majority (67%). This is indicative of strong trader bias towards the pair continuing to climb higher.

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.