USD/JPY posted considerable losses on Wednesday, reversing the upward movement we saw on Monday and Tuesday. The pair is trading at 108.70 in the European session. On the release front, there are three US events, highlighted by Crude Oil Inventories. The markets are expecting a small surplus of 0.7M. Japan will release Current Account, with the account surplus expected to widen to JPY 1.90 trillion. On Thursday, the US releases Unemployment Claims, with the estimate standing at 177 thousand.
After a rough start to the week, the Japanese yen has regained its footing and improved on Wednesday. The yen could continue gain ground if Japan’s current account posts solid numbers in the March report. The indicator has improved in 2016 and the surplus is expected to widen in the upcoming release. Meanwhile, Japanese officials continue to warn against “currency manipulations”. Finance Minister Taro Aso continues to talk tough, saying that the government won’t back off from intervening in the currency markets if needed. Aso said it would be “natural” for the government to intervene in the markets if the yen continues to post “one-sided” gains. The yen has climbed 1300 points in 2016, and speculators are looking for the yen to move closer to the symbolic 100 level.
JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.
Will the Federal Reserve make a move in June? In its April policy statement, the Fed stayed on the sidelines, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June rate hike, but last week’s soft payrolls report has put a damper on speculation about an imminent hike. Last week, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. Upcoming data, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.
USD/JPY Fundamentals
Wednesday (May 11)
- 1:00 Japanese Leading Indicators. Estimate 96.4%. Actual 98.4%
- 10:30 US Crude Oil Inventories. Estimate 0.7M
- 13:01 US 10-year Bond Auction
- 14:00 US Federal Budget Balance. Estimate 116.2B
- 19:50 Japanese Current Account. Estimate 1.90T
- 19:50 BoJ Summary of Opinions
- 19:50 Japanese Bank Lending
- 23:45 30-year Bond Auction
Upcoming Key Events
Thursday (May 12)
- 8:30 US Unemployment Claims. Estimate 177K
*Key releases are highlighted in bold
*All release times are EDT
USD/JPY for Wednesday, May 11, 2016
USD/JPY May 11 at 7:40 EDT
Open: 109.22 Low: 108.51 High: 109.22 Close: 108.69
USD/JPY Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 106.19 | 107.57 | 108.37 | 109.87 | 110.66 | 111.30 |
- USD/JPY posted losses in the Asian session but has leveled off in European trade
- 108.37 is a weak support line
- There is strong resistance at 109.87
- Current range: 108.37 to 109.87
Further levels in both directions:
- Below: 108.37, 107.57, 106.19, and 105.18
- Above: 109.87, 110.66 and 111.30
OANDA’s Open Positions Ratio
USD/JPY ratio has shown strong movement towards short positions on Wednesday. Long positions continue to command a strong majority (61%). This is indicative of strong trader bias towards USD/JPY reversing directions and moving to higher ground.