USD/JPY – Yen Unchanged as BoJ Stands Pat

USD/JPY is unchanged in the Tuesday session. Currently, the pair is trading at 113.40. On the release front, there were no surprises from the Bank of Japan, which maintained interest rates at -0.10%. Japanese Household Spending declined 0.3%, better than the forecast of -0.8%. In the US, today’s key event is CB Consumer Confidence, with the markets expecting a strong reading of 112.8 points. On Wednesday, the Federal Reserve will set the benchmark interest rate, which is expected to remain pegged at 0.50%.

On Monday, the BoJ maintained interest rates at -0.10%, where they have been pegged since January 2016. The bank raised its GDP projection for fiscal year 2017 to 1.5 percent, up from 1.3 percent. At the same time, the BoJ highlighted the uncertainty that the economy faces due to the new US administration. President Trump has already taken some protectionist moves, and this could have a negative effect on Japan, which relies heavily on exports. The Japanese yen remains at low levels and the BoJ has previously said that it would consider action if the dollar rose above 120 yen. However, after the rate announcement, BoJ Governor said that the bank does not have a target for the currency.

The markets had predicted that US economic growth would soften in the fourth quarter, and Advance GDP fell short of the estimate. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump’s protectionist rhetoric and action, which saw tensions escalate with Mexico last week, could cloud the bright picture for the US economy.

Donald Trump has just started his new position, but he has already signed a host of controversial executive orders which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump’s unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was “too strong”, blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump’s remarks. Still, Trump’s shock election win in November has boosted the US dollar, with USD/JPY soaring 8.3% during that time.

Geopolitical and Trade Risks Dominate Market Moves

Fed Expected to Keep Rates on Hold Awaiting Trump Plan

USD/JPY Fundamentals

Monday (January 30)

  • 18:30 Japanese Household Spending. Estimate -0.8%. Actual -0.3%
  • 18:30 Japanese Unemployment Rate. Estimate 3.1%. Actual 3.1%
  • 18:50 Japanese Preliminary Industrial Production. Estimate 0.4%. Actual 0.5%
  • 21:56 Japanese Monetary Policy Statement
  • 21:56 BoJ Outlook Report
  • 21:56 BoJ Policy Rate. Estimate -0.10%. Actual -0.10%

Tuesday (January 31)

  • 1:30 BoJ Press Conference
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.0%
  • 9:45 US Chicago PMI. Estimate 55.1
  • 10:00 US CB Consumer Confidence. Estimate 112.6

Upcoming Key Releases

Wednesday (February 1)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 165K
  • 10:00 US ISM Manufacturing PMI. Estimate 55.0
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rates. Estimate <0.75%

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, January 31, 2017

USD/JPY January 31 at 7:05 EST

Open: 113.67 High: 113.96 Low: 113.24 Close: 113.40

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.85 110.94 112.57 113.80 114.83 115.90

USD/JPY edged lower in the Asian session but has recovered in European trade

  • 112.57 is providing support
  • 113.80 is a weak resistance line
  • Current range: 112.57 to 113.80

Further levels in both directions:

  • Below: 112.57, 110.94 and 109.85
  •  Above: 113.80, 114.83, 115.90 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in long positions on Tuesday. Currently, long positions have a slim gain (52%). This is indicative of slight trader bias as to USD/JPY breaking out and moving 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.