The Japanese yen is almost unchanged in the Tuesday session, after posting considerable gains on Wednesday. In North American trade, USD/JPY is trading at 113.26, down 0.02% on the day. On the release front, Japanese manufacturing data disappointed. In the U.S., PPI came in at 0.1%, above the estimate of 0.0%. Core PPI dropped to 0.3%, but beat the estimate of 0.1%. On Wednesday, the U.S releases CPI reports.
Japanese indicators continue to have a bad week. The BSI Manufacturing Index slipped to 5.5 in the third quarter, down from 6.5 in the second quarter. Preliminary Machine Tool Orders nosedived, with a reading of -16.5 percent. This was the sharpest decline since July 2016. Earlier this week, 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.
Of particular concern, the capital expenditure component of GDP fell 2.8%, much weaker than the estimate of 1.6%. This capex slump, which could weigh heavily on growth and inflation, comes at a particularly inopportune time, with the U.S-China trade war in full swing. This has taken a bite out of Japanese exports and the manufacturing sector, as businesses that deal with the U.S or China are facing 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.
Only a few months ago, there was talk that the Federal Reserve could hike rates every quarter in 2019. However, signs of a slowdown in the U.S. economy have drastically changed matters, as the Fed is expected to scale back its “gradual rate hike” policy to just one hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the
Monday (December 10)
- 18:50 Japanese BSI Manufacturing Index. Actual 5.5
- 18:50 Japanese M2 Money Stock. Estimate 2.6%. Actual 2.3%
- 22:35 Japanese 30-year Bond Auction. Actual 0.79/3.8
Tuesday (December 11)
- 00:58 Japanese Preliminary Machine Tool Orders. Actual -16.8%
- 5:45 US NFIB Small Business Index. Estimate 107.3. Actual 104.8
- 8:30 US PPI. Estimate 0.0%. Actual 0.1%
- 8:30 US Core PPI. Estimate 0.1%. Actual 0.3%
- 18:50 Japanese Core Machinery Orders. Estimate 10.2%
- 18:50 Japanese PPI. Estimate 2.4%
- 23:30 Japanese Tertiary Industry Activity. Estimate 0.9%
Wednesday (December 12)
- 8:30 US CPI. Estimate 0.0%. Actual 0.1%
- 8:30 US Core CPI. Estimate 0.1%. Actual 0.3%
*All release times are EST
*Key events are in bold
USD/JPY for Tuesday, December 11, 2018
USD/JPY December 11 at 10:20 EST
Open: 113.27 High: 113.34 Low: 113.22 Close: 113.26
In the Asian session, USD/JPY ticked lower. The pair recorded small gains in European trade and this trend has continued 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
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