USD/JPY - Japanese Trade Surplus Jumps, Yen Unchanged

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Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Japanese yen is almost unchanged in the Monday session, as USD/JPY is trading slightly above the 106 level. On the release front, Japanese Trade Balance came in at JPY 33 trillion, easily beating expectations. Later in the day, Japan releases the Services Producer Price Index, which measures inflation in the corporate sector. The markets are expecting a weak gain of 0.1%. In the US, there are no events on the schedule. On Tuesday, the US releases CB Consumer Confidence and New Home Sales, both key indicators.

Although there were no major releases out of Japan last week, the yen showed a fair bit of volatility. Much of the movement can be attributed to market speculation as to what measures the Abe government and Bank of Japan will take in the next few weeks. The yen slipped on Wednesday on speculation that the government was planning a large fiscal spending package. However, the currency reversed directions and climbed on Thursday after BoJ Governor Haruhiko Kuroda flatly rejected the use of “helicopter money” – or increasing the budget deficit by a permanent increase in monetary base – in order to combat deflation. This tool is seen as an alternative to quantitative easing and some economists have suggested it could be used in Japan, with interest rates in negative territory and the economy in danger of recession. Kuroda added that the bank has not changed its stance of adopting further easing by way of quantitative easing, qualitative easing or lowering interest rates. The Bank of Japan meets for a policy meeting on Thursday and the markets will be looking for hints as to what, if any, monetary steps the bank will choose to implement.

The Federal Reserve will join the Bank of Japan in the spotlight this week. The Fed meets for a policy meeting on July 27 but is unlikely to announce a rate hike at that time. However, with the US posting some solid numbers in the past few weeks, speculation has risen that the bank could raise rates before the end of the year. Another rate hike will be data-dependent, so if key indicators beat expectations, the likelihood of a rate hike will continue to increase. However, the Fed will be hesitant to make a move if inflation remains stuck at very low levels, well short of the Fed’s target of around 2 percent.

USD/JPY Fundamentals

Sunday (July 24)

  • 19:50 Japanese Trade Balance. Estimate 0.24T. Actual 0.33T

Monday (July 25)

  • 19:50 Japanese SPPI. Estimate 0.1%

Upcoming Key Events

Tuesday (July 26)

  • 14:00 US CB Consumer Confidence. Estimate 95.6
  • 14:00 US New Home Sales. Estimate 560K

*Key events are in bold

*All release times are EDT

USD/JPY for Monday, July 25, 2016

USD/JPY July 25 at 7:00 EDT

Open: 106.28 High: 106.72 Low: 106.00 Close: 106.23

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.73 104.99 105.87 106.81 107.65 108.61
Click to enlarge
  • USD/JPY posted losses in the Asian session and is flat in European trade
  • There is resistance at 106.81
  • 105.87 remains a weak line in support
  • Current range: 105.87 to 106.81

Further levels in both directions:

  • Below: 105.87, 104.99, 103.73 and 102.36
  • Above: 106.81, 107.65 and 108.61

OANDA’s Open Positions Ratio

The USD/JPY ratio is currently showing long positions with a majority (55%), indicative of trader bias towards USD/JPY breaking out and moving towards higher ground.

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.