USD/JPY – Japanese yen continues to slide after weak inflation report

USD/JPY has gained ground in the Wednesday session. In the North American session, the pair is trading at 110.76, up 0.25% on the day. On the release front, Japanese PPI disappointed with a gain of 0.6% in January, shy of the estimate of 1.0%. This was the lowest level since January 2017. Later in the day, Japan releases GDP for the fourth quarter, with an estimate of 0.4%. In the U.S., consumer inflation data for January was soft. CPI ticked up to 0.0%, shy of the estimate of 0.1%. Core CPI posted a gain of 0.2%, matching the estimate. On Thursday, the U.S. publishes retail sales and PPI.

Inflation levels in the U.S. remain low, despite a strong U.S. economy and strong labor market. CPI showed no change in January, and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

Are we close to a breakthrough in the U.S-China trade war? The crisis between the two largest economies in the world has rocked equity markets and dampened risk appetite. The U.S. has imposed 10% tariffs on Chinese goods and has threatened to raise the tariffs to a punishing 25% on March 1. Trade officials from the U.S. and China are meeting for a third round of negotiations, and U.S. Treasury Secretary Steven Mnuchin has joined the talks. There was positive news on Tuesday, as President Trump said that he could postpone the March 1 deadline if the trade talks made sufficient progress. If the negotiations yield an agreement, risk appetite will jump and the safe-haven yen could head lower.

Risk appetite very much improved

Kiwi surges on less-dovish RBNZ

U.S Dollar under pressure

USD/JPY Fundamentals

Tuesday (February 12)

  • 18:50 Japanese PPI. Estimate 1.0%. Actual 0.6%

Wednesday (February 13)

  • 8:30 US CPI. Estimate 0.1%
  • 8:30 US Core CPI. Estimate 0.2%
  • 10:30 US Crude Oil Inventories. Estimate 2.1M
  • 14:00 US Federal Budget Balance. Estimate -10.5B
  • 18:50 Japanese Preliminary GDP. Estimate 0.4%
  • 18:50 Japanese Preliminary GDP Price Index. Estimate -0.4%

Thursday (February 14)

  • 8:30 US Core Retail Sales. Estimate 0.0%
  • 8:30 US Retail Sales. Estimate 0.1%
  • 8:30 US PPI. Estimate 0.1%
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 225K

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, February 13, 2019

USD/JPY February 13 at 10:00 EST

Open: 110.49 High: 110.89 Low: 110.43 Close: 110.76

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.11 109.37 110.28 110.90 112.16 112.93

USD/JPY posted small gains in the Asian and European sessions. The pair has moved higher in the North American session

  • 110.28 is providing weak support
  • 110.90 is under pressure in resistance
  • Current range: 110.28 to 110.90

Further levels in both directions:

  • Below: 110.28, 109.37, 108.11 and 107.36
  • Above: 110.90, 112.16 and 112.93

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.