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Yen Stops Bleeding, US Consumer Confidence Next

Yen Stops Bleeding, US Consumer Confidence Next

USD/JPY has reversed directions on Friday and moved to lower ground. Currently, the pair is trading slightly above the 106 line. On the release front, Japanese PPI declined 2.7%, within expectations. In the US, today’s highlight is UoM Consumer Sentiment. The indicator is expected to edge lower to 87.4 points.

The markets went on a wild roller-coaster ride on Wednesday, following the stunning news that Donald Trump had won the US presidential election. Political convention was sent on its head, as most pundits had predicted that Hillary Clinton would win the White House. Trump’s election victory which has already been labeled the most stunning win in US election history, sent shock waves across global markets to an extent not seen since the Brexit vote in June. The dollar dropped 3.7% in a tumultuous Asian session, but roared back with strong gains later in the day and continued to move higher on Thursday. Despite Friday’s correction, USD/JPY has posted strong gains of 1.9 percent.

What will a Trump election mean for the markets? Like much of his agenda, Trump’s economic platform is unclear. According to Bank of America Merrill Lynch (NYSE:BAC), given that both houses of Congress are under Republican control, Trump could implement steps to loosen fiscal policy. This would lead to greater spending, causing more inflation. In turn, interest rates would move higher and bolster the US dollar. However, Trump remains an enigma, having never held public office. His ideology is unclear (if he has one), so the markets could be in for a period of uncertainty, at least in the early stages of the Trump administration. This could lead to prolonged volatility in the currency markets. As far as monetary policy is concerned, the odds of a rate hike in December also showed some volatility immediately after the election, but are back at 71 percent, identical to the odds just before the Trump victory.

USD/JPY Fundamentals

Thursday (November 10)

  • 18:50 Japanese PPI. Estimate -2.6%. Actual -2.7%
  • 23:30 Japanese Tertiary Industry Activity. Estimate -0.2%. Actual -0.1%

Friday (November 11)

  • 14:00 US FOMC Member Stanley Fischer Speaks
  • 15:00 US Preliminary UoM Consumer Sentiment. Estimate 87.4
  • 15:00 US Preliminary UoM Inflation Expectations

*All release times are EDT

*Key events are in bold

USD/JPY for Friday, November 11, 2016

USD/JPY

USD/JPY November 11 at 5:50 EDT

Open: 106.80 High: 106.93 Low: 106.10 Close: 106.21

USD/JPY Technicals

S3S2S1R1R2R3103.02104.32105.44106.72107.49108.61
  • USD/JPY has posted slight losses in the Asian and European sessions
  • 105.44 is providing support
  • 106.72 has switched to a resistance role following losses by USD/JPY
  • Current range: 105.44 to 106.72

Further levels in both directions:

  • Below: 105.44, 104.32, 103.02 and 102.36
  • Above: 106.72, 107.49 and 108.61

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged in the Friday session. Currently, long positions have a majority (55%), indicative of trader bias towards USD/JPY reversing directions and moving to higher ground.

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