Yen's Drifting Continues At 109
MarketPulse | Apr 20, 2016 07:47AM ET
USD/JPY has posted small losses on Wednesday, continuing the downward trend which marked the Tuesday session. USD/JPY is trading at the 109 in the European session. On the release front, Japan’s trade surplus improved in March to 0.28 trillion, short of expectations. The US releases Existing Home Sales as well as Crude Oil Inventories. On Thursday, the US releases the Philly Fed Manufacturing Index and Unemployment Claims, both key indicators.
The Japanese yen has posted sharp gains since early February, but is widely considered undervalued against the US dollar. Some analysts are predicting that USD/JPY could fall to 105 or even lower in 2016. 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 fought back, sending warnings about possible intervention currency invention in order to curb the yen and combat “currency manipulations”. On Tuesday, 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. Investors have flocked to the safe-haven yen, seeking shelter from a turbulent and uncertain economy.
Oil prices have shown strong volatility since the weekend, when oil producers attended a meeting in Qatar on Sunday. The gathering, which included OPEC and non-OPEC nations, ended in disarray, without any agreement being reached by the participants. There was optimism that the parties might agree to maintain current production levels, but hopes for even this limited move were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants closed up shop and returned home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. Oil prices have zigzagged since the weekend. Initially, prices sagged after the inconclusive oil meeting, but have since rebounded sharply.
Oil producers may have failed to reach an agreement over the weekend, but they managed to cause plenty of volatility in the currency markets. Oil prices dropped after the inconclusive meeting, but have since recovered. Commodity currencies like the Canadian and Australian dollars followed suit with losses followed by gains. The safe-haven yen has taken the opposite direction and lost 100 points this week, as investors have shown more appetite for risk as oil prices have stabilized.
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USD/JPY Fundamentals
Tuesday (April 19)
- 19:50 Japanese Trade Balance. Estimate 0.45T. Actual 0.28T
Wednesday (April 20)
- 10:00 US Existing Home Sales. Estimate 5.29M
- 10:30 US Crude Oil Inventories. Estimate 2.2M
Upcoming Key Events
Thursday (April 21)
- 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
- 8:30 US Unemployment Claims. Estimate 265K
*Key releases are highlighted in bold
*All release times are DST
USD/JPY for Wednesday, April 20, 2016
USD/JPY April 20 at 6:10 EDT
Open: 109.21 Low: 108.75 High: 109.24 Close: 109.00
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 106.25 | 107.57 | 108.37 | 109.87 | 110.66 | 111.50 |
- USD/JPY has shown limited movement in the Asian European sessions
- There is resistance at 109.87
- 108.37 is providing 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 has shown movement towards short positions on Wednesday. Long positions have a strong majority (61%), indicative of strong trader bias towards the pair reversing directions and moving higher.
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