A number of U.S. economic reports may be scheduled for release this morning but they are not significant enough to break USD/JPY out of its range. The currency pair has been trapped within a narrow 150 pip trading range for the past 2 weeks with losses contained above 101.38 and gains capped at 102.83. A quiet U.S. economic calendar in the front of the week gave the dollar little reason to break out but the consolidation held into the retail sales and inflation reports along with the FOMC minutes earlier this month. This indicates that the decline in volatility in USD/JPY is not just due to the lack of market moving data. Instead forex traders have grown tired of attributing weak data to weather related distortions and have become more selective about the economic reports they respond to.

Unfortunately FX traders may have to deal with the consolidation for another week and a half because we won’t get a true sense of how the economy is doing until March. Next month’s non-farm payrolls report on March 7th could still be distorted by the weather but it is first piece of market moving U.S. data that could potentially break USD/JPY out of its range. Between now and then, a number of Federal Reserve officials including Janet Yellen will be speaking but we don’t expect them to front run the NFP report and signal a change in monetary policy. Fed Presidents Tarullo and Dudley will be speaking later this morning and as two of the most dovish voting members of the FOMC, their cautious views could keep USD/JPY pressure.

It is also very difficult for USD/JPY to rally without a significant rise in U.S. yields. Like FX traders, fixed income traders are patiently waiting for more relevant data on the U.S. economy before driving yields in one direction or the other. The following chart shows how closely USD/JPY has been tracking U.S. yields since the end of last year.

This morning’s house price report provided very little excitement for USD/JPY. According to the House Price Index, prices increased 0.8% towards the end of the year after falling 0.1% the previous month but according to S&P CaseShiller, house price growth slowed to 0.76% from 0.88% during the same period. Consumer confidence is scheduled for release later this morning along with the Richmond Fed manufacturing index – both reports are expected to dip slightly.

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