USD/JPY – Yen Shrugs Off Soft Japanese Trade Surplus

USD/JPY has edged higher in the Thursday session, as the pair trades slightly above the 109 line. In economic news, Japan’s trade surplus dropped sharply to JPY 0.17 trillion, well short of the forecast of JPY 0.61 trillion. Later in the day, Japan releases Flash Manufacturing PMI, with an estimate of 52.5 points. In the US, manufacturing and employment data missed their estimates. The Philly Fed Manufacturing Index fell to 22.0, short of the forecast of 25.6 points. Unemployment Claims climbed to 244 thousand, higher than the estimate of 241 thousand. On Friday, the US will release Existing Home Sales, which is expected to rise to 5.61 million.

Japan’s export sector has improved in recent months, boosted by stronger global demand and a weak yen. An upsurge in exports has invigorated the manufacturing industry and helped Japan continue to post trade surpluses. However, this has triggered sharp criticism from the US President Trump, who has complained about Japan’s huge trade surplus with the US. Trump has also attacked Japan for manipulating its currency for trade purposes, although the most recent US Treasury Currency Report, released last week, did not name Japan as a currency manipulator. If the yen weakens and heads back towards the 120 level, the Japanese are likely to get an earful from Trump about unfair trade practices by Japan. US Vice-President Pence was in Japan earlier this week, and said that the US wants to conclude a free trade agreement with Japan. Earlier this year, Trump pulled the US out of the Trans-Pacific Partnership, a regional free-trade agreement which was strongly supported by Japan.

The Federal Reserve has sent out broad hints that it plans to raise rates gradually in 2017, but the timing and number of moves in store remains uncertain. The Fed has broadly hinted that it plans two more rate hikes this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The odds of a June hike have slipped to 46% according to the CME Group, down sharply from 65% in early April.

USD/JPY Fundamentals

Wednesday (April 19)

  • 19:50 Japanese Trade Balance. Estimate 0.61T. Actual 0.17T

Thursday (April 20)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 25.6. Actual 22.0
  • 8:30 US Unemployment Claims. Estimate 241K. Actual 244K
  • 13:15 US Treasury Secretary Steven Mnuchin Speech
  • 20:30 Japanese Flash Manufacturing PMI. Estimate 52.5

*All release times are EST

*Key events are in bold

USD/JPY for Thursday, April 20, 2017

USD/JPY April 20 at 10:50 EST

Open: 108.83 High: 109.145 Low: 108.72 Close: 109.18

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.14 107.49 108.54 109.77 110.94 112.57

USD/JPY was flat in the Asian session. The pair edged higher in the European session and the yen remains under pressure in North American trade

  • 108.54 is providing support
  • 109.77 is the next line of resistance
  • Current range: 108.54 to 109.77

Further levels in both directions:

  • Below: 108.54, 107.49 and 106.14
  •  Above: 109.77, 110.94, 112.57 and 113.80

OANDA’s Open Positions Ratio

USD/JPY ratio has posted small gains towards long positions. Currently, long positions have a majority (67%), indicative of trader bias towards USD/JPY continuing to move 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.