USD/JPY - Yen Steady, Markets Eye U.S. Manufacturing, Jobless Reports

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Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/JPY is showing limited movement on Thursday, following gains in the past three sessions. USD/JPY is trading at the 109.70 in the European session, close to 3-week highs. On the release front, the US releases Philly Fed Manufacturing Index and Unemployment Claims, both key indicators. Japan will publish Flash Manufacturing PMI and Tertiary Industry Activity.

The Japanese yen has gained close to 10 percent against the greenback since February 1, as the safe-haven currency has taken advantage of the turmoil and uncertainty which has characterized the global economy in 2016. Despite these impressive gains, the yen is widely considered overvalued, and some analysts are predicting that USD/JPY could drop to 105 or even lower this year. 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 responded by sending warnings about possible intervention currency invention in order to curb the yen and combat “currency manipulations”. Earlier this week, 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 betting that the yen’s impressive run against the dollar will continue. As well, as long as global economic conditions remain tenuous, investors with a reduced appetite for risk will continue to seek shelter with the safe-haven yen.

Oil producers attended a meeting in Qatar on the weekend, hoping to reach an agreement to freeze production levels and prop up the price of oil. With the world awash in a huge glut of oil, crude prices have nosedived and producers have felt the pinch of dropping oil revenues. Although the participants failed to reach any consensus on production levels, they managed to cause plenty of volatility in the currency markets early in the week. Commodity currencies like the Canadian and Australian dollars showed sharp losses after the meeting, but then recovered as oil prices stabilized. The safe-haven yen has taken the opposite direction and has lost 160 points this week, as investors have shown more appetite for risky currencies at the expense of the yen.

USD/JPY Fundamentals

Thursday (April 21)

  • 12:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
  • 12:30 US Unemployment Claims. Estimate 265K
  • 13:00 US HPI. Estimate 0.4%
  • 14:00 US CB Leading Index. Estimate 0.4%
  • 14:30 US Natural Gas Storage. Estimate 6B
  • 22:00 Japanese Flash Manufacturing PMI. Estimate 49.6

Friday (April 22)

  • 00:30 Japanese Tertiary Industry Activity. Estimate -0.4%

*Key releases are highlighted in bold

*All release times are EDT

USD/JPY for Thursday, April 21, 2016

USD/JPY April 21 at 7:00 EDT

Open: 109.86 Low: 109.51 High: 109.87 Close: 109.75

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.25 107.57 108.37 109.87 110.66 111.50
Click to enlarge
  • USD/JPY has shown limited movement in the Asian and European sessions
  • 109.87 is a weak resistance line and could be tested during the day
  • 108.37 is providing strong support
  • 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 is showing little movement on Thursday, consistent with the lack of movement from USD/JPY. Long positions command a strong majority (63%), indicative of strong trader bias towards the 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.