USD/JPY – Dollar Back Below 104 as Yen Improves

USD/JPY has posted slight losses in the Friday session, as the pair just below the 104 level. In economic news, it’s a very quiet end to the trading week, with no economic releases on the schedule. BoJ Governor Haruhiko Kuroda spoke at an event in Tokyo earlier in the day. In the US, FOMC member Daniel Tarullo will deliver remarks at an event in New York City. 

The markets have cheered as US jobless claims have dropped and dropped, so there was some surprise as the key indicator climbed to 260 thousand last week, higher than the forecast of 251 thousand. This marked the first reading since August that the key indicator has not beat estimates. Still, the dollar didn’t lose any ground, as the 4-week daily average of jobless claims remains excellent. There was good news from the manufacturing front, as the Philly Fed Manufacturing Index posted a strong gain of 9.7 points, easily beating the forecast of 5.2 points. Earlier in the week, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 68 percent, as market sentiment remains high that the Fed will press the rate trigger before the end of the year.

What’s next from the BoJ? The bank will hold a policy meeting on October 31, at which time it will release a policy statement and set interest rates. The BoJ has consistently sent out a message to the markets that it was willing to adopt further easing if needed. However, it’s questionable if the bank is willing to back up its words with action, as it has stayed on the sidelines for most of 2016 despite a weak economy and deflation concerns. With the Abe government approving a large stimulus program in August, the BoJ may have given up the fight and is deferring to the government to coax inflation and growth to higher levels. If the bank doesn’t adopt any easing measures at the next policy meeting, the yen could take advantage and reverse some of its recent losses against the greenback.

USD/JPY Fundamentals

Friday (October 21)

• 10:15 FOMC Member Daniel Tarullo Speaks

• 20:54 BoJ Governor Haruhiko Kuroda Speaks

Open: 104.11 High: 104.21 Low: 103.66 Close: 103.85

USD/JPY Technical

• USD/JPY was flat in the Asian session and has posted slight losses in European trade

• 103.02 is providing support

• 104.32 is a weak resistance line

• Current range: 103.02 to 104.32

Further levels in both directions:

Below: 103.02, 102.36, 101.20 and 100.55

 Above: 104.32, 105.44 and 106.72