USD/JPY – Japanese yen sticks to 111 ahead of BoJ rate announcement

The Japanese yen is slightly lower in the Monday session. In the North American session, USD/JPY is trading at 110.96, down 0.06% on the day. On the release front, Japanese Retail Sales rebounded in July with a strong gain of 1.8%, edging above the estimate of 1.7%. This marked the strongest gain in 2018. Later in the day, the Bank of Japan winds up its policy meeting and will release a rate statement followed by a press conference. In the U.S, Pending Home Sales posted a strong gain of 0.9%, rebounding after two straight declines. On Tuesday, the U.S releases consumer spending and inflation indicators, as well as CB Consumer Confidence.

The BoJ rate statement could prove to be a non-event, as the Bank is expected to hold rates and no significant changes to the massive stimulus program are expected until inflation levels move higher. Last week’s inflation data was mixed. Tokyo Core CPI improved to 0.8%, its strongest gain in four months. The Bank of Japan has stubbornly held to its inflation of target of just under 2.0%, but this goal remains elusive. Earlier, in the week, Services Producer Price Index improved for a third straight month, jumping to 1.2% in June. This beat the estimate of 1.0% and marked the strongest gain since March 2015. At the same time, BoJ Core Inflation, the BoJ’s preferred inflation indicator, dipped to 0.4%, its smallest gain since in 11 months.

The U.S economy continues to sparkle, and Friday’s Advance GDP for the second quarter reflected this, with an excellent gain of 4.1%. This is much higher than the 2.2% gain recorded in the first quarter. This reading was within market expectations, so the dollar wasn’t able to gain ground. Strong economic numbers have kept the U.S currency at high levels, despite recent remarks by President Trump that the dollar is too high and is hampering exports. These comments have weighed on the dollar, but usually for a brief time only, as the performance of the economy has talked louder than Trump’s tweets. On Friday, Trump took credit for the strong GDP report and claimed that “these numbers are very, very sustainable”. However, analysts are being more cautious in their forecasts, with growth in the third quarter expected to drop to around 2.5 percent.

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Sunday (July 29)

• 19:50 Japanese Retail Sales. Estimate 1.7%. Actual 1.8%

Monday (July 30)

• 10:00 US Pending Home Sales. Estimate 0.4%. Actual 0.9%
• Tentative – US Loan Officer Survey
• 19:30 Japanese Unemployment Rate. Estimate 2.3%
• 19:50 Japanese Preliminary Industrial Production. Estimate -0.3%
• Tentative – BoJ Outlook Report
• Tentative – BoJ Policy Rate. Estimate -0.10%
• Tentative – BoJ Monetary Policy Statement

Tuesday (July 31)

• Tentative BoJ Press Conference
• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Personal Spending. Estimate 0.4%
• 10:00 US CB Consumer Confidence. Estimate 126.5

*All release times are DST

*Key events are in bold

USD/JPY for Monday, July 30, 2018

USD/JPY July 30 at 11:20 DST

Open: 111.03 High: 111.16 Low: 110.89 Close: 110.96

USD/JPY Technical

USD/JPY ticked higher in the Asian session. The pair was mostly flat in the European session but has posted small losses in North American trade

• 110.21 is providing support
• 111.22 is a weak resistance line

Further levels in both directions:

• Below: 110.21, 109.21 and 108.11
• Above: 111.22, 112.30, 113.75 and 114.73
• Current range: 110.21 to 111.22

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