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USD/JPY: Yen In Holding Pattern Ahead of Fed Minutes

USD/JPY: Yen In Holding Pattern Ahead of Fed Minutes

USD/JPY is flat on Wednesday, as the pair is trading at 110.30 in the European session. On the release front, Japanese Leading Indicators met expectations. BoJ Governor Haruhiko Kuroda will speak at an event in Tokyo. In the US, today’s highlight is the minutes from the Federal Reserve’s last policy meeting. We’ll also hear from two Fed members, Loretta Mester and James Bullard. On Thursday, the US releases Unemployment Claims, and Janet Yellen and Mario Draghi will delivers speeches.

The yen continues to impress and has gained 300 points since March 28. USD/JPY briefly broke below the 110 level on Tuesday, the first time that has occurred since October 2014. The BoJ has tried everything it could find in its tool box, including negative rates, but the economy hasn’t responded and inflation levels remain weak. If the markets feel that the BoJ has no more monetary easing ammunition left, then the yen could continue to strengthen, and analysts are talking about the pair dropping below the symbolic 100 level. The next BoJ policy meeting takes place at the end of the month.

The Federal Reserve remains in the headlines, although, one could argue, not for the right reasons. The markets have been treated to mixed messages from the US central bank, and this lack of communication is certainly not looked well upon the markets. Last week, Janet Yellen sent the US dollar flying on its backside, following a surprisingly dovish speech in New York. The yen posted strong gains after Yellen poured cold water on speculation of an April rate hike. Prior to her speech, several Fed members issued hawkish comments, some going as far as calling for a rate hike at the April policy meeting. Analysts will be paying close attention to the Fed minutes on Wednesday, looking for clues as to further rate projections. The markets are hoping the minutes will provide some clarity about the Fed’s monetary plans. The release of the minutes should be treated as a market-mover, and we could see some volatility in the markets following this release. In addition to the minutes, two FOMC members will deliver remarks on Wednesday.

USD/JPY Fundamentals

Wednesday (April 6)

  • 1:00 Japanese Leading Indicators. Estimate 99.9%. Actual 99.8%
  • 10:30 US Crude Oil Inventories. Estimate 3.1M
  • 12:20 US FOMC Member Loretta Mester Speaks
  • 14:00 US FOMC Meeting Minutes
  • 18:30 US FOMC Member James Bullard Speaks
  • 20:30 BoJ Governor Haruhiko Kuroda Speaks

Upcoming Key Events

Thursday (April 7)

  • 8:30 US Unemployment Claims. Estimate 271K
  • 17:30 US Fed Chair Janet Yellen Speaks

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Wednesday, April 6, 2016

USD/JPY Chart

USD/JPY April 6 at 7:05 DST

Open: 110.37 Low: 110.22 High: 110.64 Close: 110.29

USD/JPY Technical

S3S2S1R1R2R3107.57108.37109.87111.50112.48113.86
  • USD/JPY has been flat in the Asian and European sessions
  • 109.87 is providing support.
  • 111.50 is a strong resistance line
  • Current range: 109.87 to 111.50

Further levels in both directions:

  • Below: 109.87, 108.37 and 107.57
  • Above: 111.50, 112.48, 113.86 and 114.65

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Wednesday, consistent with the lack of movement from USD/JPY. Long positions command a strong majority (66%), indicative of strong trader bias towards the pair breaking out and moving to higher levels.

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