USD/JPY – Japanese yen dips as risk appetite climbs on US-China talks

USD/JPY has posted slight gains on Monday. In the North American session, the pair is trading at 111.10, up 0.38% on the day. It’s a light day for fundamentals, with no key events out of the United States. In Japan, the focus is on inflation data. SPPI remained steady rising 1.1% for a second straight month. On Tuesday, the Bank of Japan’s preferred inflation gauge, BoJ Core CPI, is expected to improve to 0.6%. The U.S. will post CB Consumer Confidence. As well, Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee.

The Japanese yen is under pressure, as stronger risk appetite has made the safe-haven yen less attractive. Investor optimism continues to rise as there are further signs that trade tensions between the U.S. and China are easing. The parties concluded a fourth round of talks last week. President Trump had said that he would raise tariffs on Chinese goods from 10% to 25% on March 1, but hinted last week that the deadline was flexible. On Sunday, Trump tweeted that he was waiving the deadline, since the parties had made “significant progress”. Trump added that he was open to meeting with Chinese President Xi, if there was further progress. The trade war between the U.S. and China has disrupted international trade and dampened global growth, so a breakthrough in the trade talks would raise risk appetite, which could mean further losses for the yen.

The Federal Reserve will be back in the spotlight this week, as Fed Chair Jerome Powell testifies before congressional committees on Tuesday and Wednesday. The Fed has been decidedly dovish early in 2019, in sharp contrast to 2018, when the Fed raised rates four times in order to keep the red-hot U.S. economy from overheating. However, the global trade war has taken a bite out of global growth, and the U.S. economy is unlikely to repeat last year’s performance. The markets will be listening closely for hints regarding future interest rate policy.

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USD/JPY Fundamentals

Sunday (February 24)

• 18:50 Japanese SPPI. Estimate 1.1%. Actual 1.1%

Monday (February 25)

• 10:00 US Final Wholesale Inventories. Estimate 0.3%. Actual 1.1%
  
• 11:00 US FOMC Member Clarida Speaks

Tuesday (February 26)

• 00:00 BoJ Core CPI. Estimate 0.6%
• 10:00 US CB Consumer Confidence. Estimate 124.3
• 10:00 Fed Chair Powell Testifies

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 25, 2019

USD/JPY February 25 at 12:10 EST

Open: 110.68 High: 110.91 Low: 110.58 Close: 111.10

USD/JPY Technical

In the Asian session, USD/JPY posted small gains but then retracted. The pair has posted small gains in the European and North American sessions

• 110.90 has switched to a support role after gains by USD/JPY
• 112.16 is the next resistance line
• Current range: 110.90 to 112.16

Further levels in both directions:

• Below: 110.90, 110.28, 109.37 and 108.11
• Above: 112.16, 112.93 and 113.70

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