USD/JPY – Japanese Yen Steady as Japanese Inflation Matches Estimate

The Japanese yen has started the week with small gains, after trading sideways on Friday. In the Monday session, USD/JPY is trading at 109.63, up 0.22% on the day. On the release front, Japanese PPI edged lower to 2.0%, matching the forecast. There are no US economic releases on the schedule. On Tuesday, the U.S releases retail sales and core retail sales.

Has the impressive streak come to an end? Japan has boasted eight consecutive quarters of economic growth, but the first quarter appears likely to buck the trend. The economy is expected to contract at an annualized rate of 0.2% in Q1, compared to strong growth of 1.6% in the fourth quarter. The sharp slowdown is being attributed to weak consumer spending and softer global demand for Japanese exports. Still, analysts are viewing the Q1 report card as a temporary blip, with second-quarter expected to rebound with annualized growth of 1.0%.

With the U.S economy firing on all cylinders, the U.S consumer is feeling very optimistic. On Friday, the UoM Consumer Sentiment improved to 98.8 in April, beating the estimate of 98.4 points. The U.S labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled workers. This was underscored last week, as JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%.

A crowded tale of the tape

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USD/JPY Fundamentals

Sunday (May 13)

  • 19:50 Japanese PPI. Estimate 2.0%. Actual 2.0%

Monday (May 14)

  • 1:59 Japanese Preliminary Machine Tool Orders. Actual 22.0%
  • 2:45 US FOMC Member Loretta Mester Speaks
  • 23:35 Japanese 30-year Bond Auction

Tuesday (May 15)

  • 8:30 US Core Retail Sales. Estimate 0.5%
  • 8:30 US Retail Sales. Estimate 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 15.1
  • 19:50 Japanese Preliminary GDP. Estimate 0.0%

*All release times are DST

*Key events are in bold

USD/JPY for Monday, May 14, 2018

USD/JPY May 14 at 11:20 DST

Open: 109.38 High: 109.60 Low: 109.21 Close: 109.63

USD/JPY Technical

S3 S2 S1 R1 R2 R3
107.29 108.00 108.89 110.11 111.22 112.06

In the Asian session, USD/JPY inched lower but then recovered. The pair edged higher in the European session and has posted small gains in North American trade

  • 108.89 is providing support
  • 110.11 is the next resistance line

Further levels in both directions:

  • Below: 108.89, 108.00, 107.29 and 106.64
  • Above: 110.11, 111.22 and 112.06
  • Current range: 108.89 to 110.11

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (58%). This is indicative of trader bias towards USD/JPY continuing to move higher.

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.