USD/JPY - Yen Steady, Current Account Surplus Jumps

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Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/JPY has posted slight gains on Friday, as the pair is trading at 108.70 in the European session. On the release front, Japan’s current account surplus widened to JPY 1.73 trillion, beating expectations. However, Consumer Confidence and Economy Watchers Sentiment both missed their estimates. In the US, the sole release is Wholesale Sales, with the markets expecting a decline of 0.2%.

The yen is on a superb run, surging over 400 points against the greenback since March 29. USD/JPY is trading below the 109 level, and analysts are saying the pair could drop below the symbolic 100 level. The Japanese economy continues to languish, grappling with weak inflation and growth levels. The BoJ has implemented strong easing measures, including negative interest rates, but the economy hasn’t responded as hoped. If the markets feel that the BoJ has no more monetary easing ammunition left, the yen could continue to strengthen. The next BoJ policy meeting takes place at the end of the month. Will the central bank adopt further easing measures or has it run out of tricks?

After Janet Yellen’s cautious speech in New York last week, the Federal Reserve followed suit on Wednesday, as the March meeting minutes were dovish. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This could result in significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. What can we expect from the Fed in 2016? There is a strong likelihood that the Fed will raise rates twice during the year, but the timetable of any moves is unclear. At a panel discussion on Thursday, Yellen said she did not consider the December rate hike a mistake and said that the Fed was monitoring the economy very carefully.

USD/JPY Fundamentals

Thursday (April 7)

  • 19:50 Japanese Current Account. Estimate 1.57T. Actual 1.73T

Friday (April 8)

  • 1:00 Japanese Consumer Confidence. Estimate 40.5. Actual 41.7
  • 2:00 Japanese Economy Watchers Sentiment. Estimate 46.5. Actual 45.4
  • 8:30 FOMC Member William Dudley Speaks
  • 10:00 US Wholesale Inventories. Estimate -0.2%

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Friday, April 8, 2016

USD/JPY April 8 at 6:50 DST

Open: 108.48 Low: 108.46 High: 109.10 Close: 108.71

USD/JPY Technical

S3 S2 S1 R1 R2 R3
106.25 107.57 108.37 109.87 111.50 112.48
  • USD/JPY has posted slight gains in the Asian session and has leveled off in European trade
  • 109.87 is a strong resistance line
  • 108.37 is providing weak support
  • Current range: 108.37 to 109.87

Further levels in both directions:

  • Below: 108.37, 107.57 and 106.25
  • Above: 109.87, 111.50, 112.48 and 113.86

OANDA’s Open Positions Ratio

USD/JPY ratio has reversed directions on Friday and shown slight gains towards long positions on Friday. Long positions command a strong majority (66%), indicative of strong trader bias towards the pair continuing to move upwards.

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.