Wednesday, July 27, 2016

The USD/JPY ratio has shown gains in long positions

•USD/JPY has posted gains in the Asian and European sessions
•104.99 has switched to support following gains by USD/JPY in the Wednesday session
•105.87 was tested earlier in resistance and remains a fluid line
•Current range: 104.99 to 105.87
The USD/JPY ratio has shown gains in long positions. Currently, long positions have a majority (63%), indicative of trader bias towards USD/JPY continuing to move towards higher ground.
The Japanese yen has reversed directions on Wednesday, posting considerable losses. USD/JPY is currently trading at 105.70. On the release front, there are no Japanese releases. In the US, the Federal Reserve will set the benchmark rate and issue a policy statement. As well, we’ll get a look at durable good orders and pending home sales.
There was positive news out of the US on Tuesday. CB Consumer Confidence dipped to 97.3 points in July, lower than the June reading of 98.0, but nonetheless another excellent release. New Home Sales followed suit, jumping to 592 thousand in June. This figure easily beat the forecast of 560 thousand. There was more good news from the manufacturing sector, as the Richmond Manufacturing Index surged, posting a reading of plus-10 points. This crushed the forecast of minus-4 points.
The Abe government is planning a significant fiscal spending package, but how big is big? On Wednesday, Abe announced a spending package of JPY 28 trillion, higher than the markets had expected. This report sent the yen lower. On Tuesday, a Nikkei report stated that the government would unveil a direct fiscal stimulus of about JPY 6 trillion yen over the next few years, pushing the Japanese currency higher. We can expect further volatility from USD/JPY as additional details about the fiscal package are released. The BoJ will issue a policy statement late Thursday, and it remains unclear if the bank will adopt further easing measures.