USD/JPY – Yen Gains Ground as US Inflation Remains Weak

The yen has improved in the Wednesday session. In North American trade, USD/JPY is trading at 113.03, down 0.38% on the day. On the release front, Japanese Preliminary GDP gained 0.3%, missing the forecast of 0.4%. In the US, CPI and Core CPI matched the forecasts, with gains of 0.1% and 0.2%, respectively. Consumer spending reports were a mix – retail sales gained 0.1%, shy of the estimate of 0.2%. Core Retail Sales came in at 0.2%, beating the forecast of 0.0%. There was disappointing news on the manufacturing front, as the Empire State Manufacturing Index slowed to 19.4 points, well short of the estimate of 25.3 points. This reading marked a 4-month low.

There were no surprises from US consumer inflation and spending data for October. Inflation indicators showed small gains, as a strong US economy has not led to higher prices. Consumer spending was unexpectedly strong in September, with Core Retail Sales posting an impressive gain of 1.6 percent. However, the October reading slowed to just 0.2 percent. These early third quarter numbers are somewhat disappointing, coming just weeks before the busy Christmas season. The Federal Reserve is keeping a close eye on inflation numbers, as an uptick in inflation indicators could mean additional rate hikes in 2018. The markets expect some action from the Fed, having priced in a rate hike in December at 91% and a January hike at 89%.

Japan’s economy continues to expand, but Preliminary GDP for the third quarter slowed to 0.3%, down from 0.6% in Final GDP for Q2. This marks the longest expansion since 2001, but a stronger economy has not translated into higher inflation levels. Earlier in the week, BoJ Governor Haruhiko Kuroda acknowledged the inflation issue, saying “it is not easy to quickly dispel the deflationary mindset that has formed over the course of 15 years of deflation.” Kuroda added that he expects inflation levels to rise, and that the BoJ would continue its massive monetary easing, a key component of the “Abenomics” program.

USD/JPY Fundamentals

Tuesday (November 14)

• 18:50 Japanese Preliminary GDP. Estimate 0.4%. Actual 0.3%

Wednesday (November 15)

• 3:00 US FOMC Member Charles Evans Speaks
• 8:30 US CPI. Estimate 0.1%. Actual 0.1%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Retail Sales. Estimate 0.2%. Actual 0.1%
• 8:30 US Core Retail Sales. Estimate 0.0%. Actual 0.2%
• 8:30 US Empire State Manufacturing Index. Estimate 25.3. Actual 19.4

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, November 15, 2017

USD/JPY November 15 at 10:45 EDT

Open: 113.46 High: 113.50 Low: 112.48 Close: 113.02

USD/JPY Technical

USD/JPY edged lower in the Asian session and lost more ground in European trade. In the North American session, the pair has reversed directions and recovered some of the earlier losses.

• 112.57 is providing support
• 113.55 is the next resistance line

Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.57, 111.53 and 110.10
• Above: 113.55, 114.49, 115.50 and 116.54

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Wednesday session. Currently, short positions have a majority (55%), indicative of trader bias towards USD/JPY continuing to move downwards.

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.