The Japanese yen has gained ground on Thursday, erasing most of the losses which marked the Wednesday session. In the North American session, USD/JPY is trading at 113.13, up 0.60% on the day. In the US, Existing Home Sales is expected to slow to 5.30 million, and Federal Reserve Chair Janet Yellen will deliver remarks at an event in Washington. There are no Japanese indicators on Friday. On Sunday, Japan will hold an election for the upper house of parliament.
The US dollar posted gains in the Asian session, after the US Senate passed a $4 trillion budget measure. The bill barely pushed through, as the vote was 51-49. Still, this is a crucial victory for President Trump, who was desperately in need of a legislative victory. The budget measure clears the way for an overhaul reform to the tax code, one of Trump’s key campaign promises. The Republicans are hopeful of passing a new tax code by the New Year, but that could be overly optimistic, as the Democrats are expected to resist Trump’s tax proposal.
Japan holds an election this weekend, and Prime Minister Shinzo Abe is expected to be returned to office. Abe is not particularly popular, but his LDP party is likely to take advantage of a fragmented opposition. If, as expected, Abe forms a majority government, we can expect more of the same with regard to Abe’s economic policy, namely, ultra-loose monetary policy, large fiscal spending and structural reform. Japan’s economy has shown improvement in 2017, but inflation remains well below the BoJ’s 2 percent target, and little has been done to reduce the country’s staggering debt.
Japanese manufacturing indicators have been pointing upwards and recent polls are pointing to strong optimism among manufacturers. A Reuters poll released on Tuesday showed that manufacturer confidence in October was at its highest level since 2007, echoing a Bank of Japan survey taken earlier in October. Automobile and electric machinery exports remain strong and have helped boost the manufacturing sector. The BoJ holds a policy meeting on October 30-31, at which time it will set interest rates and will also publish its long-term economic and price forecasts. With the BoJ forecasting that inflation will not reach 2 percent until fiscal year 2020, we’re not likely that the bank’s ultra-accommodative policy in the near future.
USD/JPY Fundamentals
Friday (October 20)
- 10:00 US Existing Home Sales. Estimate 5.30M
- 19:30 Fed Chair Janet Yellen Speaks
Saturday (October 21)
- All Day – Japanese Upper House Elections
*All release times are GMT
*Key events are in bold
USD/JPY for Friday, October 20, 2017
USD/JPY October 20 at 8:20 EDT
Open: 112.53 High: 113.47 Low: 112.51 Close: 113.20
USD/JPY Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 110.10 | 110.94 | 112.57 | 113.55 | 114.49 | 115.50 |
USD/JPY recorded considerable gains in the Asian session. In European trade, the pair edged higher but has given up these gains
- 112.57 has switched to a support role after gains by USD/JPY on Friday
Current range: 112.57 to 113.55
Further levels in both directions:
- Below: 112.57, 110.94, 110.10 and 108.69
- Above: 113.55, 114.49 and 115.50
OANDA’s Open Positions Ratios
USD/JPY ratio is showing little movement in the Thursday session. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/JPY continuing to lose ground.