USD/JPY: BoJ Stays On Sidelines, Yen Strengthens
MarketPulse | Mar 15, 2016 07:55AM ET
USD/JPY has posted strong gains on Tuesday, trading just above the 113 line in the European session. On the release front, the Bank of Japan maintained its monetary policy, but presented a bleak assessment of the economy. In the US, we’ll get a look at Retail Sales and PPI. The markets are braced for slight declines from these key indicators. On Wednesday, the FOMC will set interest rates and release a monetary policy statement.
The BoJ did not make any changes to monetary policy on Tuesday, but sounded pessimistic about the economy and warned that weak inflation will continue. The BoJ maintained its aggressive base money target of JPY 80 trillion and a 0.1 percent negative interest rate on some reserves held by the central bank. BoJ Governor Haruhiko Kuroda noted that exports and output is down, due to slowing growth in emerging economies. The BoJ surprised the markets in December when it adopted negative rates, but the markets and the public have soured on the move, which has failed to lift inflation or weaken the Japanese currency. Further easing steps will likely be revisited in April, with many experts expecting the BoJ to expand monetary stimulus next month.
All eyes will be on the Federal Reserve on Wednesday, as the Fed concludes a two-day policy meeting. Most experts are expecting the Fed to remain on the sidelines and not raise rates, given current economic conditions. Although the US economy continues to expand, growth has been softer in 2016 compared to the red-hot pace which marked the economy in H2 of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. Fed policymakers are divided on how to respond to persistently low inflation. Some FOMC members favor preempting inflation with a rate hike, while others feel that the economy is currently too fragile for such a move. The Fed will likely maintain its tightening bias and continue to monitor key economic indicators. If the US economy shows strength in H1 of 2016, a rate hike will be a strong possibility in the middle of the year.
USD/JPY Fundamentals
Monday (March 14)
- 23:35- BoJ Monetary Policy Statement
Tuesday (March 15)
- 00:30 Japanese Revised Industrial Production. Estimate 3.7%. Actual 3.7%
- 00:30 Japanese Tertiary Industry Activity. Estimate 0.4%. Actual 1.5%
- 2:32 BoJ Press Conference
- 8:30 US Core Retail Sales. Estimate -0.2%
- 8:30 US PPI. Estimate -0.2%
- 8:30 US Retail Sales. Estimate -0.1%
- 8:30 US Core PPI. Estimate 0.1%
- 8:30 US Empire State Manufacturing Index. Estimate -10.3 points
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Upcoming Key Events
Wednesday (March 16)
- 8:30 US Building Permits. Estimate 1.20M
- 8:30 US Core CPI. Estimate 0.2%
- 14:00 FOMC Economic Projections
- 14:00 FOMC Statement
- 14:00 FOMC Federal Funds Rate
- 14:30 FOMC Press Conference
*Key releases are highlighted in bold
*All release times are DST
USD/JPY for Tuesday, March 15, 2016
USD/JPY March 15 at 7:25 EST
Open: 113.83 Low: 112.90 High: 114.13 Close: 113.04
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 109.87 | 111.50 | 112.48 | 113.86 | 114.65 | 115.85 |
- USD/JPY has posted losses in the Asian and European sessions
- 113.86 has some breathing room in resistance as the pair trades at lower levels
- 112.48 is providing support
- Current range: 112.48 to 113.86
Further levels in both directions:
- Below: 112.48, 111.50, 109.87, and 108.37
- Above: 113.86, 114.65, 115.85 and 116.65
OANDA’s Open Positions Ratio
USD/JPY ratio is unchanged. Long positions retain a strong majority (60%), indicative of strong trader bias towards the pair reversing directions and moving to higher levels.
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