USD/JPY – Yen gains ground as retail sales beats expectations

The Japanese yen has edged higher in the Thursday session, erasing the losses seen on Wednesday. In North American trade, the pair is trading at 111.26, down 0.38% on the day. On the release front, Japanese retail sales dropped to 1.8%, but still beat the estimate of 1.5%. Later in the day, Japan releases Tokyo Core CPI, with a forecast of 0.8%. In the U.S, Core PCE Price Index edged up to 0.2%, while Personal Spending remained pegged at 0.4%. Both of these indicators matched the estimates. Unemployment claims rose to 213 thousand, just below the forecast of 214 thousand.

Investors are keeping a close eye on Tokyo Core CPI, the fourth Japanese inflation indicator this week. Although the indicators have been within expectations, inflation remains a headache for the BoJ, as a radical program monetary easing has failed to coax inflation to the target of around 2 percent. Rather than reduce the inflation target, the Bank will likely postpone yet again the timeline for its 2% target to fiscal year 2020 or beyond. Massive quantitative and qualitative easing have failed to coax inflation higher, so policymakers may have to consider other means of fiscal easing in order to encourage more spending and push inflation higher.

The U.S economy continues to fire on all cylinders. GDP for Q2 was revised upwards to 4.2%, edging above the estimate of 4.0%. This reading was above the initial GDP release of 4.1% back in July. Growth in the second quarter was much stronger than in Q1, which posted a gain of 2.2%. Will the strong data continue in the third quarter? Consumer spending has been strong early in the quarter, but housing data has disappointed, with recent key indicators missing expectations.

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USD/JPY Fundamentals

Wednesday (August 29)

• 19:50 Japanese Retail Sales. Estimate 1.3%. Actual 1.5%

Thursday (August 30)

• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.4%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 8:30 US Unemployment Claims. Estimate 214K. Actual 213K
• 10:30 US Natural Gas Storage. Estimate 58B. Actual 70B
• 19:30 Tokyo Core CPI. Estimate 0.8%
• 19:30 Japanese Unemployment Rate. Estimate 2.4%
• 19:50 Japanese Preliminary Industrial Production. Estimate 0.3%

Friday (August 31)

• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.5

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, August 30, 2018

USD/JPY August 30 at 11:15 DST

Open: 111.68 High: 111.76 Low: 111.29 Close: 111.26

USD/JPY Technical

USD/JPY ticked lower in the Asian session and posted further losses in European trade. The pair posted is showing limited movement in the North American session

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

Further levels in both directions:

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

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