USD/JPY – Japanese Yen Dips as Tariff Tensions Ease

USD/JPY has posted gains in the Tuesday session, continuing the upward movement we saw on Monday. In the North American session, USD/JPY is trading at 105.61, up 0.20% on the day. On the inflation front, Japanese Services Producer Price Index ticked lower to 0.6%, missing the forecast of 0.7%. The Bank of Japan Core CPI remained unchanged at 0.8%, edging above the estimate of 0.7%. In the US, CB Consumer Confidence dropped to 127.7, missing the forecast of 131.2 points. As well, the Richmond Manufacturing Index dropped sharply to 15 points, well off the estimate of 23 points. On Wednesday, the US releases Final GDP and Japan will publish Retail Sales.

The tariff spat between China and the US has shaken up global stock markets and also caused volatility in the currency markets. The safe-haven Japanse yen gained 1.2% last week and hit 5-month highs, as risk appetite sagged after US President Trump slapped tariffs on China on Thursday. However, fears of a global trading war which could spark a worldwide recession have eased this week, and the yen is lower, as investor risk appetite has improved. This follows the Chinese decision to file applications with the World Trade Organization regarding the tariffs, a move which could lead to an amicable resolution of the tariff spat between the two largest economies in the world.

Japanese inflation remains around 1 percent, well below the Bank of Japan target of around 2 percent. BoJ officials have consistently said that it will not reduce its ultra-accommodative monetary policy until inflation moves closer to target. With the rebound in the Japanese economy, there has been speculation that the BoJ could tighten its policy, which could cause some volatility from the yen.

US durable goods reports ended the week on a high note, but the dollar still lost ground on Friday. Core Durable Goods Orders rebounded with a strong gain of 1.2%, crushing the estimate of 0.5%. This marked the strongest gain since July 2016. Durable Goods Orders jumped to an 8-month high, with a gain of 3.1%. The reading easily beat the forecast of 1.6%. The US manufacturing sector continues to expand at an impressive clip, a result of stronger global growth and a cheaper US dollar, which makes US goods less expensive for foreign buyers.

USD/JPY Fundamentals

Monday (March 26)

• 19:50 Japanese Services Producer Price Index. Estimate 0.7%. Actual 0.6%

 Tuesday (March 27)

• 1:00 Bank of Japan Core CPI. Estimate 0.7%. Actual 0.8%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.1%. Actual 6.4%
• 10:00 US CB Consumer Confidence. Estimate 131.2. Actual 127.7
• 10:00 US Richmond Manufacturing Index. Estimate 23
• 11:00 US FOMC Raphael Bostic Speaks

 Wednesday (March 28)

• 8:30 US Final GDP. Estimate 2.7%
• 8:30 US Final GDP Price Index. Estimate 2.3%
• 8:30 US Goods Trade Balance. Estimate -74.1B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.6%
• 10:00 US Pending Home Sales. Estimate 2.1%
• 10:30 US Crude Oil Inventories
• 12:00 US FOMC Member Raphael Bostic Speaks
• 19:50 Japanese Retail Sales. Estimate 1.7%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, March 27, 2018

USD/JPY March 27 at 10:15 EST

Open: 105.40 High: 105.90 Low: 105.39 Close: 105.61

USD/JPY Technical

USD/JPY edged lower in the Asian session. The pair reversed directions in the European session and moved higher. USD/JPY has recorded slight losses early in North American trade

• 105.53 is a fluid line. Currently, it is providing weak support
• 106.64 is the next resistance line

Further levels in both directions:

• Below: 105.53, 104.32, 103.09 and 101.84
• Above: 106.64, 107.29 and  108.00
• Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Tuesday session. Currently, long positions have a majority (69%), indicative of trader bias towards USD/JPY continuing to head 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.