USD/JPY – Japanese Yen Ticks Higher, Fed Decision Looms

The Japanese yen is slightly higher in Wednesday trade. In the North American session, USD/JPY is trading at 106.38, down 0.15% on the day. In Japan, Flash Manufacturing PMI is expected to improve to 54.3 points. In the US, the current account deficit widened to $128 billion, above the estimate of $125 billion. On the housing front, Existing Home Sales is forecast to rise to 5.41 million. All eyes are on the Federal Reserve, which is expected to raise the benchmark rate to a range of between 1.50% and 1.75%. On Thursday, the US releases unemployment claims.

The Bank of Japan has appointed two new deputy governors, Masayoshi Amamiya and Masazumi Wakatabe, to 5-year terms. On Wednesday, Anamiya said that “conceptually and theoretically, we haven’t hasn’t ruled out the possibility of adjusting the yield curve”, leaving the door open to raising rates even if inflation remains shy of the 2 percent target. However, Anamiya added that the Bank has not reached the point of having to make such a decision. In other words, the bank is planning to maintain its ultra-accommodative policy for the foreseeable future.

The markets are keeping a close eye on the Federal Reserve, which will release a rate statement later in the day. The Fed is expected to raise rates for the first time in 2018, and Fed Chair Jerome Powell will preside as chair of the FOMC for the first time, followed by Powell’s first post-FMOC press conference. The Fed has sounded marginally more hawkish recently – will this trend continue in the rate statement? The Fed rate projection remains at three rates for 2018, but with the US economy continuing to perform well, this forecast could be revised upwards to four rates. If the rate statement is unexpectedly hawkish, the US dollar could respond with gains.

USD/JPY Fundamentals

Wednesday (March 21)

• 8:30 US Current Account. Estimate -125B. Actual -128B
• 10:00 US Existing Home Sales. Estimate 5.41M. Actual 5.54M
• 10:30 US Crude Oil Inventories. Estimate +2.6M. Actual -2.6M
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.75%
• 14:30 US FOMC Press Conference
• 20:30 Japanese Flash Manufacturing PMI. Estimate 54.3

Thursday (March 22)

• 8:30 US Unemployment Claims. Estimate 225K
• 19:30 Japanese National Core CPI. Estimate 1.0%

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, March 21, 2018

USD/JPY March 21 at 12:20 EST

Open: 106.54 High: 106.55 Low: 106.08 Close: 106.38

USD/JPY Technical

USD/JPY edged higher in the Asian and European sessions. The pair has posted slight losses in North American trade

• 105.53 is providing support
• 106.64 is the next resistance line

Further levels in both directions:

• Below: 105.53, 104.32 and 103.09
• Above: 106.64, 107.29, 108.00 and 109.11
• Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight gains in short positions. Currently long positions have a majority (72%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.