USD/JPY has posted slight gains on Thursday, as the pair trades at 113.60 in the European session. Japanese numbers disappointed, as Preliminary Machine Tool Orders posted a sharp decline of 22.6%. PPI came in at -3.4%, matching the forecast. On Thursday, Japan will release BSI Manufacturing Index, with an estimate of 4.2 points. In the US, today’s highlight is Unemployment Claims, which is expected to drop to 272 thousand.
Japanese releases continue to point downwards, indicative of a downturn in economic activity. Japanese GDP contracted in the fourth quarter, current account surplus dropped sharply, and PPI posted another decline, marking an eleventh straight drop. These soft numbers have intensified pressure on the BoJ to take further monetary action at its policy meeting next week. The BoJ adopted negative interest rates in late January, but policymakers have little to show for the surprise move which shocked the markets. Inflation has not lifted, Japanese bond yields are below or close to zero, and the yen has actually gained 5 percent since the BoJ move. With this gloomy background in mind, there is every likelihood that the central bank will announce some easing measures in March or April.
US Nonfarm Payrolls is one of the most important economic indicators, so an excellent January report should have buoyed the US dollar against its major rivals late last week. The indicator impressed with a reading of 242 thousand, much higher than the estimate of 195 thousand. This was much stronger than the previous (revised) reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Why then, did a stellar NFP release not impress the markets? The reason was that wage growth, which has consistently lagged behind other employment indicators, surprised the markets with a decline of 0.1% in January, the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline means that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to press the rate trigger at its policy meeting later this month.
USD/JPY Fundamentals
Thursday (March 10)
- 8:30 US Unemployment Claims. Estimate 272K
- 10:30 US Natural Gas Storage. Estimate -51B
- 13:01 US 30-year Bond Auction
- 14:00 US Federal Budget Balance. Estimate -198.3B
- 18:50 Japanese BSI Manufacturing Index. Estimate 4.2 points
*Key releases are highlighted in bold
*All release times are EST
USD/JPY for Thursday, March 10, 2016
USD/JPY March 10 at 6:25 EST
Open: 113.23 Low: 113.15 High: 113.81 Close: 113.58
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 109.87 | 111.50 | 112.48 | 113.86 | 114.65 | 115.85 |
- 113.86 is a weak resistance line and could break during the day
- 112.48 remains busy and has switched to support as USD/JPY posted gains in the Wednesday session
- 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 continues to show little movement, consistent with the lack of movement from USD/JPY. Long positions retain a strong majority (62%), indicative of strong trader bias towards the pair continuing to move to higher levels.