USD/JPY – Dollar Gains as US GDP Sparkles

USD/JPY has posted gains in the Wednesday session. In North American trade, the pair is trading at 110.22, up 0.45% on the day. On the release front, Japanese Retail Sales jumped 1.9%, easily beating the forecast of 1.0%. In the US, Preliminary GDP impressed with a sharp gain of 3.0%, beating the estimate of 2.7%. There was more positive news from the employment front, as ADP Nonfarm Payrolls jumped to 237 thousand, crushing the forecast of 185 thousand. Later in the day, Japan releases Preliminary Industrial Production, with the markets braced for a decline of 0.4%. On Thursday, there are a host of key events in the US, led by unemployment claims.

The US economy continues to perform well, and this was underscored on Wednesday, as Preliminary GDP (second estimate) for the second quarter was revised to 3.0%. This figure was a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to second quarter growth, which posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, which continues to hover at low levels. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong signal that the economic momentum has continued into the third quarter.

The Japanese yen is considered a safe-haven asset, with the currency often showing volatility following geopolitical tensions. This has been the case this week, as the yen initially posted gains after North Korea fired a missile over Japanese territory on Tuesday, drawing sharp condemnations from Japan and the US. The easing of tensions since the missile launch has enabled the US dollar to recover and push above the symbolic 110 level. Still, if North Korea decides to fire another missile towards Japan, it’s a safe bet that the yen will gain ground.

Like other Western economies, Japan remains gripped with low inflation. This has resulted in the Bank of Japan keeping in place its ultra-accommodative monetary policy. Unlike the US and Europe, however, the BoJ has given no indications of tightening policy anytime soon, insisting that that inflation must first rise closer to its target of 2%. The economy is headed in right direction, as GDP has expanded for six consecutive quarters. In the second quarter, GDP impressed with a gain of 1.0%, well above the forecast of 0.6%. Still, with inflation nowhere near the BoJ’s target, the bank’s radical stimulus program is likely to remain in place for the foreseeable future.

North Korea Tension Eases but concerns linger

USD/JPY Fundamentals

Tuesday (August 29)

  • 19:50 Japanese Retail Sales. Estimate 1.0%. Actual 1.9%

Wednesday (August 30)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 185K. Actual 237K
  • 8:30 US Preliminary GDP. Estimate 2.7%. Actual 3.0%
  • 8:30 US Preliminary GDP Price Index. Estimate 1.0%. Actual 1.0%
  • 9:15 US FOMC Member Jerome Powell Speaks
  • 10:30 US Crude Oil Inventories. Estimate -1.8M
  • 19:50 Japanese Preliminary Industrial Production. Estimate -0.4%

Upcoming Events

Thursday (August 31)

  • 8:30 US Unemployment Claims. Estimate 237K
  • 8:30 US Personal Spending. Estimate 0.4%
  • 9:45 US Chicago PMI. Estimate 58.7
  • 10:00 US Pending Home Sales. Estimate 0.4%

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, August 30, 2017

USD/JPY August 30 at 10:30 EDT

Open: 109.76 High: 110.44 Low: 109.54 Close: 110.28

USD/JPY Technical

S3 S2 S1 R1 R2 R3
107.49 108.69 110.10 110.94 112.57 113.55

USD/JPY showed little movement in the Asian session. The pair posted gains in European trade and continues to move upward in the North American session

  • 110.10 was tested earlier in support and is a weak line
  • 110.94 is the next resistance line

Current range: 110.10 to 110.94

Further levels in both directions:

  • Below: 110.10, 108.69, 107.49 and 106.28
  • Above: 110.94, 112.57 and 113.55

OANDA’s Open Positions Ratios

USD/JPY ratio is showing slight gains towards long positions. Currently, long positions have a majority (67%), indicative of trader bias towards USD/JPY continuing to moving upwards.

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.