Yen Steadies After Sharp Gains
MarketPulse | Mar 18, 2016 07:59AM ET
USD/JPY is steady on Friday, as the pair trades at 111.50 in the North American session. On the release front, the BoJ released the minutes of its January policy meeting. There are no Japanese releases on Friday. Over in the US, today’s highlight is UoM Consumer Sentiment, with the markets anticipating the indicator to improve to 92.1 points. As well, three FOMC members will deliver remarks during the day, and the markets will be looking for some feedback from the policymakers with regard to Wednesday’s FOMC policy statement.
With the Japanese economy struggling, pressure has been building on the BoJ to adopt further easing steps. However, the central bank did not make any changes to monetary policy on Tuesday, but rang warning bells about the economy and said that weak inflation levels would 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 are down due to slowing growth in emerging economies. On Thursday, the BoJ released the minutes of its January policy meeting, when it shocked the markets by adopting negative interest rates for the first time ever. There was no discussion about the BoJ’s bond-purchase program (QQE), but experts are of the opinion that the central bank could make significant easing moves in April, combining a rate cut with an expansion of QQE. If the BoJ does make a move, traders can expect the high-flying yen to reverse directions and lose ground.
As widely expected, the Federal Reserve remained on the sidelines and did not raise interest rates at its policy meeting on Wednesday, maintaining the benchmark rate at 0.25%. The Fed statement noted that the US economy remains vulnerable to an uncertain global economy, but expects to raise rates later in the year due to moderate growth and “strong job gains”. The statement was dovish in tone, a clear departure from the December meeting, when the Fed raised rates for the first time in nine years and talked about four rate hikes over the course of 2016. In a short three months, global demand has weakened, precipitated by the Chinese slowdown, and US numbers have cooled in comparison to the economy’s torrid pace in the second half of 2015. If inflation and employment numbers push higher in next several months, a rate hike in mid-2016 seems a good bet.
USD/JPY Fundamentals
Thursday (March 16)
- 23:50 BoJ Monetary Policy Meeting Minutes
Friday (March 17)
- 9:00 US FOMC Member William Dudley Speaks
- 10:00 US Preliminary UoM Consumer Sentiment. Estimate 92.1
- 10:00 US Preliminary UoM Inflation Expectations
- 11:00 US FOMC Member Eric Rosengren Speaks
- 14:00 US FOMC Member James Bullard Speaks
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Monday (March 21)
- 10:00 US Existing Home Sales
*Key releases are highlighted in bold
*All release times are DST
USD/JPY for Friday, March 18, 2016
USD/JPY March 18 at 7:20 DST
Open: 111.36 Low: 110.79 High: 111.58 Close: 111.47
USD/JPY Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 107.39 | 108.37 | 109.87 | 111.50 | 112.48 | 113.86 |
- USD/JPY has shown choppiness in the Asian and European sessions
- 111.50 is under strong pressure in resistance and was tested earlier in the day
- 109.87 is a strong support line
- Current range: 109.87 to 111.50
Further levels in both directions:
- Below: 109.87, 108.37 and 107.39
- Above: 111.50, 112,48, 113.86 and 114.65
OANDA’s Open Positions Ratio
USD/JPY ratio is unchanged. Long positions command a strong majority (67%), indicative of strong trader bias towards the pair reversing directions and moving to higher levels.
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