USD/JPY – Dollar shrugs off soft CPI, pushes yen to 6-month low

The Japanese yen continues to post losses this week. In Thursday’s North American session, USD/JPY is trading at 112.50, up 0.44% on the day. On the release front, the focus is on U.S inflation reports. CPI edged down to 0.1%, shy of the forecast of 0.2%. Core CPI remained steady at 0.2%, matching the forecast. Unemployment claims dropped to 214 thousand, easily beating the estimate of 226 thousand. The indicator has not posted a gain since November. There are no Japanese events on the schedule. On Friday, the U.S releases the UoM Consumer Sentiment report.

Japanese manufacturing data was lukewarm this week. Earlier in the week, Preliminary Machine Tool Orders softened in June, with a gain of 11.4%. The indicator has now weakened for five consecutive months. This was followed by Core Machinery Orders, which declined 3.7% in May, but still beat the estimate of -5.2%. Still, the BoJ and government forecasts remain optimistic, as manufacturers are expected to increase capital expenditure this fiscal year, which is a vote of confidence in the economy.  

Japanese policymakers are keeping a close eye on the nasty tariff battle between the U.S and China. Although the Trump administration hasn’t imposed tariffs on Japan, a full-blown global trade war could hamper the Japanese economy, which is heavily reliant on its export sector. After the U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind since it does not import that amount of goods from the U.S. Still, the Chinese could take counter-steps such as lowering the value of the yuan.

  Equities shrug off trade tariff tensions

  US Inflation Eyed as Markets Pare Losses

Thursday (July 12)

• 8:30 US CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Unemployment Claims. Estimate 226K. Actual 214K
• 10:30 US Natural Gas Storage. Estimate 55B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -92.3B

Friday (July 13)

• 00:30 Japanese Revised Industrial Production. Estimate -0.2%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, July 12, 2018

USD/JPY July 12 at 11:35 DST

Open: 111.73 High: 112.63 Low: 110.28 Close: 112.45

USD/JPY Technical

In the Asian session, USD/JPY ticked higher. The pair edged higher in the European session and has been steady in North American trade

• 112.30 was tested earlier in support. It is a weak line
• 113.75 is the next resistance line

Further levels in both directions:

• Below: 112.30, 111.22, 110.21 and 109.21
• Above: 113.75, 114.73 and 115.51
• Current range: 112.30 to 113.75

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