USD/JPY – Yen Shrugs off Strong Japanese Inflation, Mfg. Reports

USD/JPY has edged higher in the Monday session. In North American trade, the pair is trading at 113.60. On the release front, Japanese PPI posted a gain of 2.1%, above the estimate of 1.8%. Preliminary Machine Tool Orders posted a strong gain of 34.7%. In the US, the Empire State Manufacturing Index disappointed with a reading of -1.0, short of the forecast of 7.2 points. On Tuesday, construction numbers will be in focus, with the release of Building Permits and Housing Starts.

Japan started the week with solid data, but the yen failed to respond. On the inflation front, PPI has rebounded in remarkable fashion, showing improvement in 10 straight releases. The index jumped to 2.1% in April, above the forecast of 1.8%. Is inflation on the move? We won’t get a look at Tokyo Core CPI and other inflation indicators until next week, but stronger numbers would put pressure on the BoJ to reconsider its ultra-loose monetary policy, which has yet to produce sustained growth or higher inflation, as was advertised by the government and the BoJ. There was more positive news from the manufacturing sector, as orders for machine tools jumped 34.7% in April, on a year-on year basis.

The yen recorded gains on Friday, as US consumer spending and inflation numbers fell short of estimates. CPI came in at 0.2%, short of the estimate of 0.3%. Core CPI, which excludes the most volatile items, posted a small gain of 0.1, shy of the estimate of 0.2%. Retail Sales came in at 0.3%, compared to the forecast of 0.5%. Retail Sales rose 0.4%, short of the estimate of 0.6%. Consumer confidence remained strong, as the reading of 97.7 beat the forecast of 97.0 points. These numbers underscored a troubling trend where strong consumer confidence has failed to translate into increased consumer spending.

Dollar Held to Ransom

Donald Trump’s firing of FBI director James Comey could have been viewed as yet another controversial move by the temperamental president, but the firing has set off a political firestorm in Washington. Trump has been accused of triggering a constitutional crisis and undermining the rule of law. Comey had been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, so predictably, Comey’s dismissal has raised suspicions that Trump is trying to impede the investigation by firing Comey. The crisis could heat up further, with calls in Congress to appoint an independent investigator into Trump’s connections with Russia. This latest political storm has yet to shake up the markets, but a prolonged crisis could paralyze Washington and delay Trump’s agenda of tax reform and increased fiscal spending.

USD/JPY Fundamentals

Sunday (May 14)

  • 19:50 Japanese PPI. Actual 2.1%

Monday (May 15)

  • 1:58 Japanese Preliminary Machine Tool Orders. Actual 34.7%
  • 8:30 US Empire State Manufacturing Index. Estimate 7.2. Actual -1.0
  • 10:00 US NAHB Housing Market Index. Estimate 68. Actual 70
  • 16:00 US TIC Long-Term Purchases. Estimate 68.3B

Tuesday (May 16)

  • 8:30 US Building Permits. Estimate 1.27M
  • 8:30 US Housing Starts. Estimate 1.26M

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, May 15, 2017

USD/JPY May 15 at 10:50 EDT

Open: 113.34 High: 113.73 Low: 113.15 Close: 113.60

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.77 110.94 112.57 113.55 114.96 115.90

USD/JPY was flat in the Asian session and was choppy in European trade. The pair has edged higher in North American trade

  • 112.57 is providing support
  • 113.55 was tested in resistance and is under strong pressure
  • Current range: 112.57 to 113.55

Further levels in both directions:

  • Below: 112.57, 110.94 and 109.77
  •  Above: 113.55, 114.96, 115.90 and 116.87

OANDA’s Open Positions Ratio

In the Monday session, USD/JPY ratio is showing long and short positions are almost evenly split, indicative of a lack of trader bias as to which direction USD/JPY will take next.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.