USD/JPY – Yen Ticks Lower, Japanese Inflation Slips

The Japanese yen has posted slight losses on Friday, erasing the gains from the Thursday session. USD/JPY is trading slightly below the 107 line. On the release front, Japanese Producer Price Index declined 4.2%, matching the forecast. Tertiary Industry Activity posted a gain of 1.4%, well above expectations. In the US, today’s key release is UoM Consumer Sentiment.

Japanese numbers were a mix on Thursday. PPI, which measures inflation in the manufacturing sector, continues to point to deflation. The index, which dropped 4.2% in April, has failed to post a gain in over a year. This negative trend comes as no surprise, given that Japanese manufacturing numbers remain weak, pointing to a manufacturing sector in decline. There was better news from Tertiary Industry Activity, which gained 1.4%, easily beating the forecast of 0.7%. The indicator has been struggling, posting mostly declines in recent months. Earlier in the week, Japanese Final GDP posted a respectable gain of 0.5% in the first quarter, edging above the initial government report of a 0.4% for Q1. The GDP release is certainly good news for the government, which recently had an about-face and postponed a sales tax hike from April 2017 to October 2019. This delay is intended to help struggling households and rejuvenate sluggish consumer spending, a key component of economic activity. Still, the economy is on shaky ground, as global demand remains soft and a strong yen could hamper the struggling export sector.

Last week’s Nonfarm Payrolls of just 38,000 new jobs shocked the markets and sent the US dollar sharply lower. A couple of minor employment indicators that followed were soft, leading to some concern about the strength of the US labor market. However, these concerns should be laid to rest after key job numbers this week were solid and beat expectations. On Wednesday, JOLTS Job Openings improved to 5.79 million, easily beating the forecast of 5.67 million. Unemployment Claims followed suit with a strong reading. The indicator dropped to 264 thousand, compared to an estimate of 269 thousand. Significantly, this marked the lowest jobless report in six weeks. With the Federal Reserve mulling over a rate hike in the next few months, employment numbers will be especially significant, and any unexpected readings could result in volatility in the currency markets.

USD/JPY Fundamentals

Friday (June 10)

• 00:30 Japanese Tertiary Industry Activity. Estimate 0.7%. Actual 1.4%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 94.1 points
• 10:00 US Preliminary UoM Inflation Expectations
• 14:00 US Federal Budget Balance. Estimate -56.2B

*Key events are in bold

*All release times are EDT

USD/JPY for Friday, June 10, 2016

USD/JPY June 10 at 6:40 EDT

Open: 107.11 Low: 106.66  High: 107.26 Close: 106.78

USD/JPY Technical

• USD/JPY was flat in the Asian session. The pair has recorded small losses in the European session
• 107.16 is under strong pressure in resistance. The line was tested earlier and could see further action in the Friday session
• 105.87 is providing support
• Current range: 105.87 to 107.16

Further levels in both directions:

• Below: 105.87, 104.99, 103.73
•  Above: 107.16, 108.37, 109.87 and 110.66

OANDA’s Open Positions Ratio

The USD/JPY ratio is showing little movement on Friday, consistent with the lack of movement from USD/JPY. Long positions have a strong majority (69%), indicative of trader bias towards USD/JPY reversing directions and moving 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.