The Japanese yen has edged higher on Tuesday, continuing the upward trend which marked the Monday session. Early in the North American session, USD/JPY is trading at 110.40. On the release front, BoJ Core CPI edged lower to 0.1 percent. In the US, the trade deficit narrowed to $43.6 billion, better than the forecast of $46.0 billion. On Wednesday, all eyes will be on the Federal Reserve, which will publish the minutes of its March policy meeting. As well, the US will release ADP Employment Change and ISM Non-Manufacturing PMI.
Japan’s economy has shown improvement in recent months, buoyed by stronger exports. At the same time, domestic consumption remains soft and inflation levels remain well below the BoJ’s target of 2.0% percent. The BoJ’s preferred inflation indicator, BoJ Core CPI, remains weak and dipped to 0.1 percent. With such low inflation levels, the Bank of Japan is unlikely to tighten monetary policy anytime soon.
The US economy has looked sharp in 2017, and the markets are expecting strong data for the first quarter. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending, a key component of economic growth. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. With the economy headed in the right direction, the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger two or three more times in 2017.
The markets will be paying close attention to the minutes of the March meeting, when the Fed raised rates by a quarter-point, to a range of 0.75%-1.00%. Any hints about the timing of the next hike, as well as the tone of the minutes are factors which could move the currency markets on Wednesday. The markets considered the rate statement overly cautious, and this sentiment sent the US dollar broadly lower. If the reaction to the minutes is one of disappointment, the dollar could again head downwards.
USD/JPY Fundamentals
Tuesday (April 4)
- 1:00 Japanese BoJ Core CPI. Estimate 0.2%. Actual 0.1%
- 8:30 US Trade Balance. Estimate -46.0B. Actual -43.6B
- 10:00 US Factory Orders. Estimate 1.0%
- 10:00 US IBD/TIPP Economic Optimism. Estimate 53.2
- 16:30 US FOMC Member Daniel Tarullo Speech
Upcoming Key Events
Wednesday (April 5)
- 8:15 US ADP Nonfarm Employment Change. Estimate 191K
- 10:00 US ISM Non-Manufacturing PMI. Estimate 57.1
- 14:00 US FOMC Meeting Minutes
*All release times are GMT
*Key events are in bold
USD/JPY for Tuesday, April 4, 2017
USD/JPY April 4 at 8:45 EST
Open: 110.68 High: 110.76 Low: 110.26 Close: 110.37
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 107.49 | 108.54 | 109.77 | 110.94 | 112.57 | 113.80 |
USD/JPY has edged lower in the Asian and European sessions
- 109.77 is providing support
- 110.94 is the next resistance line
- Current range: 109.77 to 110.94
Further levels in both directions:
- Below: 109.77, 108.54 and 107.49
- Above: 110.94, 112.57, 113.80 and 114.83
OANDA’s Open Positions Ratio
USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (60%). This is indicative of trader bias towards USD/JPY reversing directions and moving upwards.