USD/JPY – Dollar Moves Above 123, US Inflation Numbers Match Forecast

USD/JPY continues to move higher, as the pair trades at 123.40 in the North American session. The yen slump continues, as the pair trades close to 3-month lows. In economic news, there are no Japanese releases on the schedule. In the US, inflation levels met expectations, as CPI and Core CPI both posted small gains of 0.2% in October.

Meanwhile, the Fed watch continues, as speculation has increased that the Federal Reserve will begin a series of rate hikes, commencing in December. Fed Chair Janet Yellen has called the December meeting a “live possibility” of a rate hike. With the US economy close to full employment and many economic indicators pointing upwards, one of the last pieces in the puzzle is inflation. Last week’s PPI was awful, posting a second straight decline. On Tuesday, CPI and Core CPI posted small gains of 0.2%, matching the forecast. Are these lukewarm readings enough to convince the Fed to make a move in December? The Fed has said that inflation levels are an important factor in determining its decision in December, but with US inflation stuck at low levels, it remains a guessing game as to whether the Fed will press the rate trigger at its next policy meeting.

The Japanese economy continues to struggle, and this was underlined by the weak Japanese Preliminary GDP report earlier in the week. GDP dropped by an annualized 0.8 percent in the third quarter. This was a second straight contraction for GDP, which means that technically the economy is in a recession. The weak reading was much worse than expected, as the estimate stood at -0.2%. There are both domestic and global factors which are responsible for the Japanese economy’s poor performance. Consumer and business spending are down, inflation is anemic, and weaker global demand, especially from China, continues to hamper economic growth. Attention will now shift to the BOJ, which releases a monetary policy statement on Thursday. Will the BOJ change monetary policy? Many analysts are calling for the BOJ to act now, but recent statements from BOJ policymakers have sounded surprisingly optimistic, so the BOJ may take the easy route and announce an economic package rather than implement new stimulus measures. Still, the BOJ will be under increasing pressure to act after the dismal GDP report, and this could weigh on the yen during the week.

USD/JPY Fundamentals

Tuesday (Nov. 17)

  • 13:30 US CPI. Estimate 0.2%. Actual 0.2%
  • 13:30 US Core CPI. Estimate 0.2%. Actual 0.2% 
  • 14:15 US Capacity Utilization Rate. Estimate 77.5%. Actual 77.5%
  • 14:15 US Industrial Production. Estimate 0.1%. Actual -0.2%
  • 15:00 US Mortgage Delinquencies. Actual 4.99%
  • 15:00 US NAHB Housing Market Index. Estimate 64 points. Actual 62 points 
  • 21:00 US TIC Long-Term Purchases

Upcoming Key Events

Wednesday (Nov. 18)

  • 13:30 US Building Permits. Estimate 1.15M 
  • 19:00 US FOMC Meeting Minutes

*Key releases are highlighted in bold

*All release times are GMT

 

USD/JPY for Tuesday, November 17, 2015

USD/JPY November 17 at 15:55 GMT

USD/JPY 123.44 H: 123.48 L: 123.17

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
120.40 121.50 122.40 123.74 125.63 126.84
  • The Japanese yen was steady in the Asian session. USD/JPY posted losses in the European session but then recovered. USD/JPY continues to post gains in North American trade.
  • 123.74 is a weak resistance line and could break in the North American session.
  • 122.40 has strengthened in support as the yen as dropped to lower levels.
  • Current range: 122.40 to 123.74

Further levels in both directions:

  • Below: 122.40, 121.50, 120.40 and 118.53
  • Above: 123.74, 125.63 and 126.84

 

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Tuesday, as long positions retain a slight majority of positions (56%). This is indicative of slight trader bias towards the pair continuing to move to higher ground.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.