USD/JPY – Japanese yen unchanged ahead of Japanese inflation reports, Fed minutes

The Japanese yen is unchanged in the Wednesday session. In the North American session, USD/JPY is trading at 110.42, up 0.11% on the day. In economic news, Japanese All Industries Activity declined by 0.8%, missing the estimate of -0.7%. The U.S releases Existing Home Sales, which are expected to edge higher to 5.40 million. Today’s key event is the Federal Reserve minutes from the August 1 policy meeting. Later, Japan releases National Core CPI and the Services Producer Price Index. On Thursday, the U.S releases unemployment claims.

The Federal Reserve will be in the spotlight, with the release of the minutes of the August policy meeting. The Fed statement from that meeting described the economy as “strong”, the first time it used that term since 2006. Fed policymakers reiterated their commitment to raise interest rates gradually, as economic conditions remain strong. In the second quarter, GDP grew 4.1%, inflation has moved closer to the Fed’s target of 2%, and unemployment remains at record lows. The minutes are expected to underscore the Fed’s intent to raise rates twice more this year, in September and December. The Fed’s approach to rate hikes appears economically sound, but President Trump criticized the Fed this week, saying he was “not thrilled” with higher rates. Still, the Fed is widely expected to raise rates twice more this year, in September and December.

The yen continues to hug the symbolic 110 line and USD/JPY briefly broke into 109 territory earlier in the week. The Japanese currency has posted gains of 1.2% in August, with the currency benefitting from the risk apprehension due to the rash of tariffs that the U.S has slapped on its major trading partners, including Japan. However, the markets are hoping for an easing in trade tensions, with the U.S and China holding low-level talks on Wednesday and Thursday in Washington. Traders shouldn’t expect a dramatic breakthrough, but the fact that the two sides are talking has improved risk appetite. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled to kick in on Wednesday. If the talks show some progress, such as the cancellation of the upcoming tariffs, we could see some volatility from the currency markets.

Focus on Fed Minutes and Jackson Hole

USD/JPY Fundamentals

Wednesday (August 22)

• 00:30 Japanese All Industries Activity. Estimate -0.7%. Actual -0.8%
• 10:00 US Existing Home Sales. Estimate 5.44M
• 10:30 US Crude Oil Inventories. Estimate -1.6M
• 14:00 US FOMC Meeting Minutes

Thursday (August 23)

• 8:30 US Unemployment Claims 215K
• 19:30 Japanese National Core CPI. Estimate 0.9%
• 19:50 Japanese Services Producer Price Index. Actual 1.2% 
• Day 1 – Jackson Hole Symposium

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, August 22, 2018

USD/JPY August 22 at 9:35 DST

Open: 110.30 High: 110.50 Low: 110.03 Close: 110.42

USD/JPY Technical

In the Asian session, USD/JPY edged lower but then recovered. in the Asian session. The pair has showed limited movement in the European and North American sessions

• 110.21 is fluid. Currently, it is a weak support level
• 111.22 is the next 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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