USD/JPY – Hot Dollar Pushes Above 108 Yen, US Retail Sales Next

USD/JPY continues to post gains on Tuesday, as the pair is trading at 108.40. On the release front, there are no Japanese events on the schedule. In the US, today’s highlights are Core Retail Sales and Retail Sales. On Wednesday, the US releases PPI.

The Japanese economy showed improvement in the third quarter, as Preliminary GDP rose 0.5 percent, (on an annualized basis, the gain was an impressive 2.2 percent) This was welcome news for the BoJ, as the strong figure gives the bank some breathing room regarding further monetary easing. Still, the yen could not take advantage of the positive news and declined 1.2 percent on Monday, hitting its lowest level against the greenback since early June.

The US dollar has looked sharp since the Trump election win last week, a stunning result and caused turmoil in the global markets. USD/JPY has slipped 3.9 percent in the past week. Market sentiment is currently very favorable towards the dollar, as a Trump presidency (together with a Republican-controlled Congress) could signal a looser fiscal policy and a cut in taxes. This would likely result in greater inflation, which would lead to higher interest rates and hence a stronger dollar. At the same time, Donald Trump remains a political enigma, and aside from being “pro-business”, he has been very short on specifics with regard to an economic platform. This lack of certainty means we could be in for plenty of surprises from President Trump, which could translate into volatility in the currency markets.

With the Federal Reserve policy meeting just a month away, expectations are high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at an impressive 86 percent, so barring some sudden negative data, we appear headed for a rate hike before the end of 2016.

USD/JPY Fundamentals

Tuesday (November 15)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.6%
• 8:30 US Empire State Manufacturing Index. Estimate -1.5
• 8:30 US Import Prices. Estimate 0.4%
• 9:05 US FOMC Member Daniel Tarullo Speech
• 10:00 US Business Inventories. Estimate 0.2%
• 13:30 US FOMC Member Stanley Fischer Speech

Wednesday (November 16)

• 8:30 US PPI. Estimate 0.3%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, November 15, 2016

USD/JPY November 15 at 6:50 EST

Open: 108.21 High: 108.40 Low: 107.76 Close: 108.37

USD/JPY Technical

• USD/JPY has been flat in the Asian and European sessions
• 107.49 continues to provide support
•  There is resistance at 108.61
• Current range: 107.49 to 108.61

Further levels in both directions:

• Below: 107.49, 106.72, 105.44 and 104.32
•  Above: 108.61, 109.47 and 110.68

OANDA’s Open Positions Ratio

USD/JPY ratio is showing gains in short positions. Currently, short positions have a majority (55%), indicative of trader bias towards USD/JPY reversing directions and moving to lower 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.