USD/JPY: Yen Under Pressure, Markets Await Key U.S. Reports

The Japanese yen has posted slight gains on Wednesday. Early in the North American session, the yen is trading at 106.60. There are no Japanese events on Wednesday. It’s another quiet day in the US, with only one event on the schedule. Crude Oil Inventories is expected to show another decline, with a forecast of -1.3 million. On Thursday, the US will release Unemployment Claims as well as manufacturing and housing data.

The yen continues to struggle, having lost some 6 percent since July 11. The yen finds itself at levels not seen since the Brexit vote in late June. Fresh from a convincing election week earlier in July, the Abe government is busy working on a fiscal spending package. The Bank of Japan meets for a policy meeting in late July and could adopt new monetary measures which would further weaken the currency.

Central banks remain in the spotlight. Last week, the BoE surprised the markets and held off from lowering rates. Will the ECB make a move at its policy meeting on Thursday? The ECB is under pressure to adopt further monetary easing, but the markets are not expecting a rate cut from the current rate of 0.00%. Still, a dovish rate statement or any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the third second largest economy in Europe, will be soon be waving goodbye to the EU. This move (and the negotiations preceding it) are bound to have profound economic ramifications on both Britain and the EU, and could result in significant volatility in the currency markets.

USD/JPY Fundamentals

Wednesday (July 20)

  • 10:30 US Crude Oil Inventories. Estimate -1.3M

Upcoming Key Releases

Thursday (July 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 5.1
  • 8:30 US Unemployment Claims. Estimate 271K
  • 10:00 US Existing Home Sales. Estimate 5.48M

*Key events are in bold

*All release times are EDT

USD/JPY for Wednesday, July 20, 2016

USD/JPY Daily Chart

USD/JPY July 20 at 8:35 EDT

Open: 106.11 High: 106.71 Low: 105.82 Close: 106.62

USD/JPY Technical

  • USD/JPY showed limited movement in the Asian session and has posted slight gains in European trade
  • 106.81 is a weak resistance line and could break in the North American session
  • 105.87 was tested earlier in support
  • Current range: 105.87 to 106.81

Further levels in both directions:

  • Below: 105.87, 104.99, 103.73 and 102.36
  • Above: 106.81, 107.65 and 108.61

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing slight gains in short positions. Currently, long positions have a majority (55%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

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