The Japanese yen is subdued on Tuesday, as USD/JPY trades at 120.80 in the European session. On the release front, BOJ Governor Haruhiko Kuroda will speak at an event in Tokyo. As well, Japan will release Consumer Confidence early on Wednesday. There are no major releases out of the US. With the lack of economic cues today, the pair could have an uneventful day.
The yen continues to trade near the 121 level this week. The Japanese currency dropped over 200 points following the BOJ’s decision to adopt negative interest rates, which shocked the markets. The markets will be looking for some commentary from BOJ Haruhiko Kuroda when he delivers remarks later in Tokyo later on Tuesday.
The BOJ has been largely unsuccessful at propping up inflation levels, which has hampered the weak Japanese economy. Will this latest move help matters? The ECB has implemented negative rates for some time, but eurozone inflation levels remain at low levels. Inflation numbers are mired at low levels, while consumer spending remains weak. We’ll get a look at Japanese Consumer Confidence numbers early Wednesday, with the markets expecting a weak reading of 43.8 points.
The Federal Reserve opted to stay on the sidelines in January, sounding a cautious tone and holding rates at 0.25%. Market speculation has now shifted to the Fed’s March meeting. Will we see another rate hike at that time? The Fed probably cannot answer this question just yet, so the markets will have to show some patience.
The inflation picture remains problematic, with the Fed saying that inflation levels will remain low, and may not reach the target of 2.0% until 2018. Given these Fed’s continuing concerns about a lack of inflation, it’s hard to foresee another rate hike in March absent a strong improvement in key US indicators.
The manufacturing sector is another weak spot in the US economy, and this was underscored last week, as the December reports for durables were dismal. Durable Goods dropped 1.2%, while Core Durables plunged 5.1%, its weakest showing since August 2014. These poor numbers underscore ongoing weakness in the US manufacturing sector, which has not improved despite positive economic conditions.
There was more disappointing news on the housing front last week, as Pending Home Sales posted a negligible gain of 0.1%, well off the estimate of 1.0%.
USD/JPY Fundamentals
Tuesday (Feb. 2)
- 10:00 US IBD/TIPP Economic Optimism. Estimate 47.8 points
- All Day – US Total Vehicle Sales. Estimate 17.4M
- 13:00 US FOMC Member Esther George Speaks
- 21:30 BOJ Haruhiko Kuroda Speaks
Wednesday (Feb. 3)
- 00:00 Japanese Consumer Confidence. Estimate 43.8 points
*Key releases are highlighted in bold
*All release times are EST
USD/JPY for Tuesday, February 2, 2016
USD/JPY February 2 at 6:45 EST
Open: 121.34 Low: 121.05 High: 121.44 Close: 121.37
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 118.53 | 119.58 | 120.40 | 121.50 | 122.40 | 123.67 |
- USD/JPY has shown limited movement in the Asian and European sessions
- There is weak resistance at 121.50. Will this barrier break during the day?
- 120.40 is providing support
- Current range: 120.40 to 121.50
Further levels in both directions:
- Below: 120.40, 119.58, 118.53 and 116.88
- Above: 121.50, 122.40 and 123.67
OANDA’s Open Positions Ratio
USD/JPY ratio is showing little change on Tuesday, reflective of a lack of movement from the pair. Long positions continue to command a solid majority (62%), which is indicative of strong trader bias towards the pair moving higher.