Dollar Closing In On 111 Yen As Trade War Escalates

The Japanese yen has inched lower in the Friday session. In the North American trade, USD/JPY is trading at 110.73, up 0.09% on the day. On the release front, the Bank of Japan held the course on monetary policy. In the U.S, the Empire State Manufacturing Index is forecast to drop to 19.1 points. We’ll also get a look at UoM Consumer Confidence, which is forecast to soften to 98.5 points.

There were no surprises from the Bank of Japan policy meeting. Policymakers maintained interest rates at -0.10%. The bank also downgraded its inflation forecast to a range of between 0.5% and 1.0%, underscoring that the massive stimulus program has failed to raise inflation anywhere near the bank’s target of around 2 percent. Japanese officials are nervously watching as the Trump administration slapped further tariffs on $50 billion of Chinese products. Although Japan appears to be in Trump’s good graces for now, an escalation in tariffs could trigger a global trade war, which would be disastrous for Japan’s export-reliant economy.

As widely expected, the Federal Reserve raised interest rates by a quarter-point, to a range between 1.75 percent and 2.00 percent. Fed Chair Jerome Powell sounded hawkish in his press conference, saying that the economy was performing well and that “overall outlook for growth remains favorable”. This message echoed the rate statement, in which policymakers said that “economic activity has been rising at a solid rate”, pointing to stronger consumer spending and business investment. What was may have been the most notable development was that the Fed rate projections were revised upwards, predicting two additional rate hikes in 2018, for a total of four hikes. Until now, the Fed had projected three rate hikes this year. This represents a nod to the strength of the U.S economy and could boost the dollar against its rivals.

USD/JPY Fundamentals

Thursday (June 14)

  • Tentative – BoJ Monetary Policy Statement
  • Tentative – BoJ Policy Rate. Estimate -0.10%

Friday (June 15)

  • Tentative – BoJ Press Conference
  • 8:30 US Empire State Manufacturing Index. Estimate 19.1
  • 9:15 US Capacity Utilization Rate. Estimate 78.1%
  • 9:15 US Industrial Production. Estimate 0.2%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.5
  • 10:00 US Preliminary UoM Inflation Expectations
  • 16:00 US TIC Long-Term Purchases. Estimate 58.5B

*Key events are in bold

USD/JPY for Friday, June 15, 2018

USD/JPY Chart for June 14-15, 2018

USD/JPY June 15 at 8:15 DST

Open: 110.63 High: 110.90 Low: 110.39 Close: 110.67

USD/JPY Technicals

S3S2S1R1R2R3108.00108.89110.11111.22112.06113.39

USD/JPY ticked higher in the Asian session and has posted limited gains in European trade

  • 110.11 is providing support
  • 111.22 is the next resistance line

Further levels in both directions:

  • Below: 110.11, 108.89, 108.00 and 107.29
  • Above: 111.22, 112.06 and 113.39
  • Current range: 110.11 to 111.22

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight movement towards short positions. Currently, long positions have a majority (57%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

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