USD/JPY – Limited Activity as US Inflation Dips

The Japanese yen remains practically unchanged this week, as USD/JPY trades just above the 107 line. On the release front, US inflation numbers remain soft, as PPI came in at 0.0% last month. In Japan, BoJ Governor Haruhiko Kuroda spoke at a press conference in Osaka.

US inflation indicators remain soft, as underscored by weak manufacturing inflation numbers in August. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. We’ll get a look at consumer inflation numbers on Wednesday, with the release of Core CPI and CPI.

US numbers wrapped up last week on a high note. Core Retail Sales improved to 0.3%, edging above the estimate of 0.2%. Retail Sales posted a nice gain of 0.6%, well above the estimate of 0.3%. There was excellent news from the UoM Consumer Sentiment, which bounced back from a weak reading in July and improved to 84.6 points, its best showing since November 2012. The forecast stood at 83.2 points. These indicators point to an increase in consumer confidence and spending, which underscore a deepening economic recovery. Meanwhile, job numbers continue to be source of concern. Unemployment Claims rose to 315 thousand, the largest number of claims in 10 weeks. The reading was much higher than the estimate of 306 thousand. This follows soft numbers from JOLTS Job Openings and a dismal Nonfarm Payrolls last week. The troubling job numbers are unlikely to affect the Fed’s plan to continue trimming QE later this week, but a soft labor market could postpone plans to raise interest rates by mid-2015.

In Japan, BSI Manufacturing Index provided some positive news from the manufacturing sector, which has struggled. The index bounced back from a reading of -13.9 points in Q1, rising to 12.7 points in Q2. This surprised the markets, which had expected the indicator to fall to -10.3 points. With zero separating contraction from expansion, the indicator points to surprisingly strong optimism from large Japanese manufacturers. Earlier in the week, Core Machinery Orders came in at 3.5%, sharply down from 8.8% in the previous release. This followed a weak reading from Tertiary Industry Activity, which posted a flat reading of 0.0%.

USD/JPY for Tuesday, September 16, 2014

USD/JPY September 16 at 12:55 GMT

USD/JPY 107.13 H: 107.33 L: 106.93

USD/JPY Technical

• USD/JPY moved higher in the Asian session but then retracted. The pair has shown little change in the European session.
• 106.85 is an immediate support level. The next support line is 105.44.
• 107.68 is a weak resistance line. 108.58 follows.
• Current range: 106.85 to 107.68

Further levels in both directions:

• Below: 106.85, 105.44, 104.17, 103.07 and 102.53
• Above: 107.68, 108.57, 109.82 and 110.68

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Tuesday. This is consistent with the pair’s current lack of movement. The ratio has a majority of short positions, indicative of trader bias towards the yen breaking out of range trading and moving higher.

USD/JPY Fundamentals

• 5:30 BoJ Governor Haruhiko Kuroda Speaks.
• 12:30 US PPI. Estimate 0.1%.
• 12:30 US Core PPI. Estimate 0.1%.
• 13:00 US TIC Long-Term Purchases. Estimate 24.3B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.