USD/JPY – Japanese yen dips on as GDP shrinks

The Japanese yen is down slightly in the Monday session. In North American trade, USD/JPY is trading at 113.00, up 0.26% on the day. On the release front, Japan’s current account surplus dropped sharply to JPY 1.21 trillion, down from 1.33 trillion. This missed the estimate of JPY 1.29 trillion. Japanese Final GDP declined 0.6%, missing the estimate of 0.5%. In the U.S, JOLTS Job Openings improved to 7.08 million, but was well short of the estimate of 7.22 million. On Tuesday, Japan releases manufacturing data, while the U.S. releases Producer Price Index reports.

The new trading week started with dismal Japanese data, as Final GDP in the third quarter declined 0.6%. This was the second decline this year. On an annualized basis, the economy declined by 2.5% in Q3, after a gain of 2.8% in the second quarter. This was the worst downturn since 2014. In particular, the capital expenditure component of GDP fell 2.8%, much weaker than the estimate of 1.6%. This capex slump could dampen growth and inflation and has weighed on business confidence.

The ongoing global trade war is a primary factor in the weak reading, as Japanese companies which export to the U.S. or China have been hurt by higher tariffs. A weaker eurozone economy has led to softer European demand for Japanese exports. Making matters worse, domestic demand remains fragile, as nervous consumers continue to hold tightly onto their purse strings.

In the U.S., the week ended with soft employment numbers. Nonfarm employment change was weaker than expected, plunging from 250 thousand to 155 thousand. This was well off the forecast of 198 thousand. Wage growth remained stuck at 0.2%, missing the estimate of 0.3%. There was better news from the unemployment rate, which remained at a sizzling 3.7%. The data points to slowing growth in the U.S, which could lead to a change in monetary policy. The Federal Reserve minutes from the November meeting indicated that policymakers discussed changing their stance of gradual increases rate increases. The markets are currently looking at one rate hike next year – just a few months ago, analysts were predicting up to four rate hikes in 2019.

European open – Tough week for UK and markets

Global growth and Brexit fears dominate proceedings

USD/JPY Fundamentals

Sunday (December 9)

  • 18:50 Japanese Bank Lending. Estimate 2.2%. Actual 2.1%
  • 18:50 Japanese Current Account. Estimate 1.29T. Actual 1.21T
  • 18:50 Japanese Final GDP. Estimate -0.5%. Actual -0.6%
  • 18:53 Japanese Final GDP Price Index. Estimate -0.3%. Actual -0.3%

Monday (December 10)

  • 0:02 Japanese Economy Watchers Sentiment. Estimate 49.5. Actual 51.0
  • 10:00 US JOLTS Openings. Estimate 7.22M
  • 18:50 Japanese BSI Manufacturing Index
  • 18:50 Japanese M2 Money Stock. Estimate 2.6%
  • 22:35 Japanese 30-year Bond Auction

Tuesday (December 11)

  • 1:00 Japanese Preliminary Machine Tool Orders
  • 8:30 US PPI. Estimate 0.0%
  • 8:30 US Core PPI. Estimate 0.1%
  • 18:50 Japanese Core Machinery Orders. Estimate 10.2%

*All release times are EST

*Key events are in bold

USD/JPY for Monday, December 10, 2018

USD/JPY December 10 at 10:55 EST

Open: 112.71 High: 113.06 Low: 112.24 Close: 113.00

USD/JPY Technical

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

In the Asian session, USD/JPY posted small losses but recovered. The pair recorded small gains in European trade and is slightly higher in North American trade

  • 112.30 is providing support
  • 113.75 is the next resistance line
  • Current range: 112.30 to 113.75

Further levels in both directions:

  • Below: 112.30, 111.20 and 110.28
  • Above: 113.75, 114.73, 115.50 and 116.55

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.