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Japanese Yen Improves, Shrugs Off Sharp US Numbers

Published 05/03/2018, 10:58 AM
Updated 03/05/2019, 07:15 AM

The Japanese yen has posted gains in the Thursday session, after little movement on Wednesday. In North American trade, USD/JPY is trading at 109.37, down 0.42% on the day. On the release front, unemployment claims edged up to 211 thousand, easily beating the estimate of 225 thousand. In the services sector, ISM Non-Manufacturing PMI dropped for a third straight month, coming in at 56.8 points, above the estimate of 56.1 points. There are no Japanese events, as Japan is closed for a holiday. On Friday, the focus is on US employment data, with the release of wage growth, nonfarm payrolls and the unemployment rate.

As expected, the Federal Reserve maintained the benchmark rate at a target of 1.5% to 1.75% on Wednesday. The rate statement was significant, with policymakers noting that “overall inflation has moved closer to 2 percent”. This was more hawkish than the March statement, which said that inflation indicators “have continued to run below 2 percent”. With inflation moving closer to the Fed target of 2 percent, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate hike this year stand at 50%. The Fed rate statement also noted that “market-based measures of inflation compensation remain low”, a reference to soft wage growth, which is at 2.7%, lower than the 3% rate that the Fed would like to see.

Japan’s economic recovery has been impressive, as the economy has expanded for eight consecutive quarters, its longest streak since the 1980s. At the same time, the economy experienced a slowdown in the first quarter of 2018. Annualized growth in Q4 stood at 1.6% but stands to drop sharply in Q1, with an estimate of just 0.5%. One factor in the slowdown is a significant drop in exports, due to the stronger Japanese currency. The yen has gained about 3% against the dollar in 2018, hurting the competitiveness of Japanese exports. The Japanese consumer, however, remains pessimistic, and the April reading of 43.6 marked an 8-month low.

USD/JPY Fundamentals

Thursday (May 3)

Friday (May 4)

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, May 3, 2018

USD/JPY

USD/JPY May 3 at 10:30 DST

Open: 109.83 High: 109.91 Low: 109.15 Close: 109.37

USD/JPY Technicals

S3 S2 S1 R1 R2 R3
107.29 108.00 108.89 110.11 111.22 112.06

USD/JPY has edged lower in the Asian and European sessions. The pair is steady in North American trade

  • 108.89 is providing support
  • 110.11 is the next resistance line

Further levels in both directions:

  • Below: 108.89, 108.00, 107.29 and 106.64
  • Above: 110.11, 111.22 and 112.06
  • Current range: 108.89 to 110.11

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight movement towards long positions in the Thursday session. Currently, long positions have a majority (62%), indicative of trader bias towards USD/JPY reversing directions and heading lower.

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