USD/JPY – Yen Edges Higher, Markets Eye US Construction Data

USD/JPY has posted slight losses in the Wednesday session, as the pair trades at 103.40. In economic news, Japan released the All Industries Activity report. The indicator edged down to 0.2%, matching the forecast. In the US, we’ll get a look at Building Permits and Crude Oil Inventories. On Thursday, the US releases the Philly Fed Manufacturing Index and unemployment claims.

On Tuesday, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UoM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

The Bank of Japan will hold a policy meeting on October 31, at which time it will release a policy statement and set interest rates. The BoJ has consistently sent out a message to the markets that it was willing to adopt further easing if needed. However, it’s questionable if the bank is willing to back up its words with action, as it has stayed on the sidelines for most of 2016 despite a weak economy and deflation concerns. With the Abe government approving a large stimulus program in August, the BoJ may have given up the fight and is deferring to the government to coax inflation and growth to higher levels. If the bank doesn’t adopt any easing measures at the next policy meeting, the yen could take advantage and gain ground against the greenback.

USD/JPY Fundamentals

Wednesday (October 19)

• 8:30 US Building Permits. Estimate 1.17M
• 8:30 US Housing Starts. Estimate 1.18M
• 8:30 US Crude Oil Inventories. Estimate 2.2M
• 14:00 US Beige Book
• 19:45 FOMC Member William Dudley Speaks

Upcoming Key Events

Thursday (October 20)

• 00:30 Japanese All Industries Activity. Estimate 0.2%. Actual 0.2%
• 8:30 US Philly Fed Manufacturing Index. Estimate 5.2
• 8:30 US Unemployment Claims. Estimate 251K

*All release times are EDT

*Key events are in bold

USD/JPY for Wednesday, October 19, 2016

USD/JPY October 19 at 5:40 EDT

Open: 103.87 High: 103.95 Low: 103.40 Close: 103.44

USD/JPY Technical

• USD/JPY showed limited movement in the Asian session and has posted losses in the European session
• 103.02 is a weak support line
• There is resistance at 104.32
• Current range: 103.02 to 104.32

Further levels in both directions:

• Below: 103.02, 102.36, 101.20 and 100.55
•  Above: 104.32, 105.44 and 106.72

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement in the Wednesday session. Currently, long positions have a small majority (52%), indicative of slight trader bias towards USD/JPY breaking out and moving higher.

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.