USD/JPY - Dollar Pushes Above 117 Yen, U.S. And Japanese Markets Closed

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By Kenny Fisher

USD/JPY has posted slight gains in the Monday session, continuing the upward movement seen on Friday. Currently, USD/JPY is trading at 117.40. Markets in Japan and the US are closed for holidays, so there are no economic events on the schedule. On Tuesday, the ISM Manufacturing PMI is the key release, with the indicator expected to rise to 53.7 points.

The year 2016 couldn’t end fast enough for the wobbly Japanese yen. The currency plunged 14.7% in the fourth quarter, as the US dollar took full advantage of a strong US economy and a hawkish Federal Reserve, which raised interest rates in December. The Japanese economy continues to struggle, and last week’s key consumer indicators pointed to continuing weakness in inflation and spending. Household spending declined 1.5%, marking a ninth straight decline. The markets had predicted a small gain of 0.2%.

The Japanese economy continues to grapple with deflation, as underscored by Tokyo Core CPI. The key indicator came in at -0.6%, weaker than the estimate of -0.4%. If the US economy continues to heat up in 2017, we could see the Fed step in with further rate hikes, which would likely push the yen to even lower levels.

The Federal Reserve will be back in the spotlight on Wednesday, with the release of the minutes from the December policy meeting, when the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues as to the Fed’s future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. If the economy’s positive momentum continues in early 2017, the Fed could be inclined to raise rates another quarter point in order to prevent the economy from overheating. A rate hike would lead to broad gains for the US dollar.

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, January 2, 2017

USD/JPY January 2 at 7:00 EST

Open: 116.74 High: 117.43 Low: 116.71 Close: 117.38

USD/JPY Technical

S3 S2 S1 R1 R2 R3
114.83 115.88 116.88 118.05 118.85 119.83
  • USD/JPY showed limited movement in the Asian session, but has posted gains in European trade
  • 116.88 is providing support
  • 118.05 is the next resistance line
  • Current range: 116.88 to 118.05

Further levels in both directions:

  • Below: 116.88, 115.88, 114.83 and 113.39
  • Above: 118.05, 118.85 and 119.83

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in the session. Short positions have a majority (57%), indicative of trader bias towards USD/JPY reversing directions and moving to lower ground.

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