USD/JPY – Japanese inflation improves but yen falls to 2-week low

The Japanese yen has ticked higher in the Tuesday session. In North American trade, USD/JPY is trading at 113.70, up 0.09% on the day. On the release front, Japanese SPPI ticked higher to 1.3%, above the estimate of 1.2%. It was a similar trend for BoJ Core CPI, the preferred inflation indicator for the Bank of Japan. The indicator edged higher to 0.6%, just above the forecast of 0.5%. This marked the highest level in seven months. In the U.S., CB Consumer Confidence dipped to 136.2, missing the estimate of 135.7 points. On Wednesday, the U.S. publishes Preliminary GDP for the third quarter, with a forecast of 3.6%.

Japanese officials will be keeping a close eye on the G-20 summit in Argentina later this week. President Trump will meet with Chinese President Xi Jinping, and the stakes could not be higher, given the full-blown trade war between the world’s two largest economies. Japan has close economic ties with both countries and the ongoing tariff spat threatens to dampen Japan’s export sector.

Will we see a thaw in the tariff spat, or will Trump and Xi take shots at each other’s policies? Last week, White House advisor Larry Kudlow warned that the summit could be the scene of a direct confrontation between the parties. However, President Trump has a knack of reaching agreements with his adversaries despite hostile rhetoric, so it’s entirely possible that the parties will agree to continue negotiating, which could lift the mood of investors and boost the equity markets.

In Japan, SPPI and BoJ Core CPI both edged higher, but the yen was unable to capitalize on Tuesday. Last week, National Core CPI, which excludes volatile food prices, came in at 1.0% on an annualized basis, for a second straight month. The BoJ’s target of around 2 percent remains elusive and inflation could face further headwinds, as the slowdown in China and the ongoing global trade war takes a bite out of the country’s export sector. As well, lower oil prices could also hamper inflation. There is little reason to expect that inflation will gather any upward momentum and some analysts are forecasting that inflation in 2018 will fall below the 1 percent level.

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USD/JPY Fundamentals

Monday (November 26)

  • 18:50 Japanese SPPI. Estimate 1.2%. Actual 1.3%

Tuesday (November 27)

  • 00:00 Japanese BoJ Core CPI. Estimate 0.5%. Actual 0.6%
  • 8:30 US FOMC Member Clarida Speaks
  • 9:00 US HPI. Estimate 0.4%. Actual 0.2%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.3%. Actual 5.1%
  • 14:30 US FOMC Member Bostic Speaks
  • 10:00 US CB Consumer Confidence. Estimate 136.2. Actual 135.7

Wednesday (November 28)

  • 8:30 US Preliminary GDP. Estimate 3.6%
  • 10:00 US New Home Sales. Estimate 583K
  • 12:00 US Fed Chair Powell Speaks
  • 18:50 Japanese Retail Sales. Estimate 2.7%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, November 27, 2018

USD/JPY November 27 at 10:40 EST

Open: 113.59 High: 113.81 Low: 113.42 Close: 113.70

USD/JPY Technical

S3 S2 S1 R1 R2 R3
110.28 111.20 112.30 113.75 114.73 115.50

USD/JPY ticked lower in the Asian session and recovered in European trade. The pair has posted small gains in North American trade

  • 112.30 is providing support
  • 113.75 is fluid. Currently, it is a weak resistance line
  • Current range: 112.30 to 113.75

Further levels in both directions:

  • Below: 112.30, 111.20, 110.28 and 109.32
  • Above: 113.75, 114.73 and 115.50

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.