USD/JPY – Yen Inches Lower Ahead of Key US Numbers

USD/JPY is almost unchanged in the Friday session. Currently, the pair is trading at 114.50. On the release front, there are no Japanese events on the calendar. In the US, we’ll get a look at retail sales, inflation, and consumer confidence numbers. Traders should be prepared for some volatility in the North American session.

The US economy is in very good shape, and the markets are expecting strong numbers from retail sales and the UoM Consumer Sentiment report. The employment picture is bright, as unemployment claims beat expectations for a second straight week. However, it should be noted that unemployment rolls may be skewed around the Christmas holiday season, so analysts are not reading too much into these unusually low releases. Still, 4-week averages for unemployment claims remain at very low levels, as the employment markets remains close to capacity as a strong US economy has led to demand for more workers. If the US economy continues to heat up, the Fed will likely step in and hike rates. On Thursday, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.

There was an air of anticipation ahead of Donald Trump’s press conference on Wednesday, but the event quickly turned into a spectacle rather than a platform outlying the president-elect’s plans as president. The markets were hoping to hear some specifics about Trump’s economic policy, but the president-elect didn’t outline any plans regarding the economy. Instead, Trump focused on attacking the media for releasing damaging material on him, and also presented his plan to avoid business conflicts while in office. The markets were clearly disappointed and the yen took advantage, posting gains against the dollar.

It was a dismal fourth quarter for the Japanese yen, as USD/JPY plunged 11.4 percent. However, the yen has moved higher in the New Year. On Thursday, USD/JPY dropped below the 114 line for the first time since December 9. Japanese consumers remain pessimistic about the economy, but there was a silver lining from the latest Consumer Confidence indicator, which rose to 43.1 points in December. This figure beat expectations and marked the indicator’s highest level since September 2013. What can we expect from the Japanese economy in the early part of 2017? There are some positive signs – a weaker Japanese yen has boosted exports, and the Bank of Japan has given the economy a cautious thumbs-up, raising its growth projections. If the economy shows stronger growth, low inflation levels could finally begin to move upwards.

Fed Officials Up Next After Trump Spooks Markets

Lack of Details Unwind the Trumpflation Trade

USD/JPY Fundamentals

Friday (January 13)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Retail Sales. Estimate 0.5%
• 8:30 US Core PPI. Estimate 0.3%
• 19:30 US FOMC Member Patrick Harker Speech
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.6
• 10:00 US Business Inventories. Estimate 0.3%
• 10:00 US Preliminary UoM Inflation Expectations

*All release times are GMT

*Key events are in bold

USD/JPY for Friday, January 13, 2017

USD/JPY January 13 at 6:30 EST

Open: 114.66 High: 115.18 Low: 114.52 Close: 114.60

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session but has retracted in European trade
• 113.80 is providing support
• 114.83 was tested earlier in resistance and is a weak line
• Current range: 113.80 to 114.83

Further levels in both directions:

• Below: 113.80, 112.57 and 110.94
•  Above: 114.83, 115.88 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Friday session. Currently, short positions have a majority (54%), indicative of trader bias towards USD/JPY breaking out and moving to lower levels.

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.