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Yen rises as Russia launches invasionHopes that diplomatic moves could avert a Russian invasion of Ukraine were shattered early Thursday, as Russia launched a full-scale attack. The move was not all that surprising, given the massive Russian buildup on the border with Ukraine during the past few weeks. Still, the fighting in the heart of Europe has weighed heavily on the financial markets, as risk appetite has fallen sharply. The safe-haven Japanese yen has gained ground and is trading at 3-week highs. Western leaders have strongly condemned the Russian military operation, with NATO's secretary-general calling it 'a brutal act of war'. There will clearly be more sanctions headed Moscow's way, but it's doubtful that this will dissuade Russian President Putin from his aim to force Ukraine back into the Russian orbit. Western Europe is dependent on Russian natural gas and with the US showing no appetite for military intervention, things are looking extremely bleak for pro-Western Ukrainian President Zelensky. On the economic calendar, Japan releases Tokyo Core CPI for February later today. CPI is expected to rise to 0.4%, up from 0.2% in January. Earlier in the week, BoJ Core CPI, the central bank’s preferred inflation gauge, rose 0.8%, lower than the 0.9% gain beforehand. Japan's inflation has been moving higher, although nowhere near the clip we've seen in the US and the UK. Still, with the Russian invasion in Ukraine likely to push energy prices even higher, inflation in Japan should continue on an upswing. Brent crude pushed above USD 100 for the first time since 2014, as the Ukraine conflict threatens to disrupt oil deliveries from Russia, a major producer. The timing couldn't be worse for the central banks of the major economies, which are struggling to contain red-hot inflation. The Fed is still expected to hike rates in March, but it may have to put a pause on additional hikes if economic conditions deteriorate. The 100-DMA at 114.35 is providing support. Close by, there is support at 114.16 115.68 is under pressure as resistance. Above, there is resistance at 116.30
by OANDA
Yen edges below 116, inflation nextThe Japanese yen has edged higher and is back below the 116 level. Still, the yen remains vulnerable, especially with US treasury yields moving higher. Earlier in the week, USD/JPY broke above116 line for the first time since January 2017. The dollar has managed to push the yen to 5-year lows on the back of rising US Treasury yields. The 10-year yield, which finished 2021 above the 1.50% level, hasn’t missed a beat in the first week of 2022 and has pushed above 1.70%. The widening US/Japan rate differential has been weighing on the yen, which is extremely sensitive to the rate differential. If US yields remain high, I would not be surprised to see USD/JPY break past the 118 mark over the coming weeks. Inflation has become a hot topic for the Federal Reserve and the BoE, as policymakers must deal with inflation levels that are double or triple the banks’ inflation target of 2%. In Japan, inflation has been at low levels for years, with deflation a constant problem. However, Japan hasn’t been immune to surging energy costs and rising prices of raw materials, and inflation is now getting some attention from the Bank of Japan. We’ll get a look at Tokyo Core CPI for December later in the day, which is expected to rise to 0.5% y/y, up from 0.3% in November. With the FOMC minutes behind us, the markets are anxiously awaiting Friday’s nonfarm payroll report. The ADP employment report surprised to the upside, with a massive 807 thousand new jobs, double the consensus of 400 thousand. The huge gain led Goldman Sachs to upwardly revise its forecast by 50 thousand to 500 thousand and some analysts are projecting a print north of the 1-million mark. Still, it should be remembered that the ADP report has not been a reliable indicator for nonfarm payrolls. The consensus for the NFP stands at 424 thousand, and if the reading comes in below expectations, we could see the US dollar falter as a weak NFP could delay the timeframe for the first rate hike of 2022. USD/JPY is putting pressure on resistance at 115.78. Above, there is resistance at 116.38 There is support at 114.54 and 113.98
by OANDA
Dollar-yen recaptures 115The US dollar has again pushed the Japanese yen above the 115 line, after breaking through the symbolic level on Wednesday. The US dollar has been showing broad weakness but has managed to push the yen back above the 115 level. Earlier in the day, USD/JPY rose to 115.22, marking a 5-week high. There are two reasons why the yen hasn't been able to take advantage of a weaker dollar. First, the pair is extremely sensitive to the yield differential, and a disappointing seven-year Treasury auction resulted in 10-year yields rising to a 3-week high, boosting USD/JPY. As well, we continue to see elevated risk appetite in the markets despite the explosion in Omicron cases. Governments are scrambling to deal with this newest Covid wave, as hospitals could be overrun by unvaccinated persons becoming infected. The markets, however, continue to rely on reports that Omicron is much less severe than Delta and will not cause the economic damage that we saw with Delta, despite the new all-time highs in cases in the US, France and elsewhere. Inflation is on the rise in Japan. Although the numbers pale in comparison to those in the US or the UK, this is a significant development, considering that Japan has grappled with deflation for years. Earlier in the week, BoJ Core CPI, the bank's preferred inflation gauge, rose 0.8% in November, its highest level since February 2018. This beat the consensus of 0.5%. The uptick we are seeing in inflation will be welcome news at the Bank of Japan and should ease policy makers' concerns about deflation. The bank's inflation target of 2% remains a long way off, but inflation could move higher if the Omicron wave does not derail economic activity.
by OANDA
US dollar closes in on 115 yen levelThe Japanese yen is unchanged on Tuesday, after starting the week with losses. With USD/JPY currently trading around the 114.80 level, it appears that the 115 line will be breached, perhaps as early as this week. The pair last breached this psychologically-important level a month ago, but was unable to  consolidate above this line. Inflation has been at the top of agenda for months for the Federal Reserve and the Bank of England, as inflation remains well above the banks' two percent inflation target. The "I" word hasn't caused such alarm in Japan, but it is certainly unusual to be discussing higher inflation levels in Japan, given that the country has had deflation for years. Inflation has been at the top of agenda for months for the Federal Reserve and the Bank of England, as inflation remains well above the banks' two percent inflation target. The "I" word hasn't caused such alarm in Japan, but it is certainly unusual to be discussing higher inflation levels in Japan, given that the country has suffered with deflation for years. There was further confirmation on Tuesday that inflation is slowly on the rise in the world's second largest economy. BoJ Core CPI, the bank's preferred inflation gauge, rose 0.8% in November, its highest level since February 2018. This beat the consensus of 0.5%. The uptick we are seeing in inflation will be welcome news at the Bank of Japan, and should ease policymakers concerns about deflation. The bank's inflation target of 2% remains a long way off, but inflation could move higher if the Omicron does not derail economic activity. Japan's economy is expected to expand 6.4% in Q4, after a contraction of -3.6% in the third quarter. However, such robust growth will be highly dependent on the Omicron variant not causing a sharp downturn, which remains a nagging uncertainty. Although Omicron appears to be less severe than Delta, it is much more contagious, and there are fears that hospitals could find themselves overstretched due to a huge influx of unvaccinated persons. USD/JPY continues to put pressure on resistance at 114.83. Above, there is resistance at 115.26 There is support at 112.90 and 112.47
by yesfish
Yen dips despite stronger JPY retail salesThe Japanese yen continues to lose ground. The yen suffered a third straight losing week, and the trend has continued on Monday. With USD/JPY currently trading around the 114.70 level, the 115 line is vulnerable. The pair last breached this symbolic level a month ago, but the dollar couldn't consolidate above this level. Japan's retail sales overperforms Christmas week started off on a positive note, as Japan Retail Sales for November posted a strong gain of 1.9% y/y, ahead of the consensus of 1.7% and above the 0.9% gain in October. Consumers were out in force as Covid-19 cases fell during November. Still, the Omicron variant has started to spread in Japan's major cities, leading to fears that the government could impose health restrictions or that consumers will stay at home to avoid contracting Omicron. Japan is set on spending its way to a stronger economy, and parliament approved a record 10.8 trillion yen budget on Friday, which includes payouts to households and businesses hit by Covid. Japan's economy is expected to roar back in Q4, with a consensus of 6.4% growth, after a contraction of -3.6% in the third quarter. Inflation is on the rise in Japan. In November, Core CPI rose 0.5% y/y, above the consensus of 0.4%. That might seem insignificant compared with inflation numbers in the UK and the United States, but given that inflation has been negligible for years in Japan, this is certainly a change in direction. The uptick in inflation will be welcome news at the Bank of Japan, and should ease policymakers' concerns about deflation. The bank's inflation target of 2% remains a long way off, but inflation could move higher if the Omicron does not derail economic activity. USD/JPY is putting pressure on resistance at 114.82. Above, there is resistance at 115.26 There is support at 113.65 and 112.90
by OANDA
CAD drifting, Manufacturing Sales nextOn Thursday, the Canadian dollar has posted small gains. In the North American session, USD/CAD is trading at 1.2147, up 0.11% on the day. The Canadian dollar has been on a tear lately. USD/CAD has fallen 1.32% in May and the Canadian dollar hasn't suffered a losing week since March. Canada's economic recovery has been bumpy and lockdown restrictions remain in place, but the Canadian dollar has jumped on the bandwagon and posted impressive gains against a wobbly US dollar, which has struggled in the second quarter. Canada releases Manufacturing Sales on Friday (12:30 GMT). The February reading hit a 6-month low, at -1.6%. However, we expect a strong rebound for March, with a consensus of 3.5%. If the release is within expectations, we could see the Canadian dollar respond with gains. We've been hearing about inflationary pressures in the US for months, and the April inflation report confirmed these concerns. CPI was much higher than anticipated. Headline CPI jumped 4.2% year-on-year, up from 2.6% and above the estimate of 3.6%. The surge in inflation has increased speculation that the Fed may consider reducing its asset-purchase programme of USD120 billion sooner rather than later. Such a tightening of policy would be bullish for the US dollar. Investors are clearly concerned that higher inflation is not temporary, but how will the Fed respond? On Tuesday, prior to the CPI release, Fed Governor Lael Brainard said that inflation risks are a "transitory surge" and urged the Fed to remain patient and continue its ultra-dovish monetary policy. Brainard pointed to the weak nonfarm payrolls report last week as an indication that the US recovery still has a ways to go, saying that, "today, by any measure, employment remains far from our goals.” There are voices calling for a re-examination of the Fed's current policy, as Fed member Robert Kaplan stated recently. For the time being, however, the Fed remains committed to its ultra-accommodative policy. If upcoming inflation reports show that higher inflation appears to be sustainable, the Fed may have to backtrack and take a hard look at tapering QE.
by OANDA
USDCAD Likely to Bounce Following CPI Data on WednesdayCanada Reports Core CPI on Wednesday. Forecast is for a slight drop from 1.5% down to 1.4% Should report come in negative, likely to see a bounce off the 1.26 handle. Trade Safe - Trade Well Regards, Michael Harding 😎 Chief Technical Strategist @ LEFTURN Inc. RISK DISCLAIMER Information and opinions contained with this post are for educational purposes and do not constitute trading recommendations. Trading Forex on margin carries a high level of risk and may not be suitable for all investors. Before deciding to invest in Forex you should consider your knowledge, investment objectives, and your risk appetite. Only trade/invest with funds you can afford to lose.
Long
by Michael_Harding
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