USD/JPY – Japanese yen steady, investors eye Japanese manufacturing, retail sales

USD/JPY has recorded slight gains on Wednesday. In the North American session, the pair is trading at 110.85, up 0.25% on the day. On the release front, U.S. data was mixed. Factory orders were up 0.1%, well off the forecast of 1.5%. Pending Home Sales sparkled with a gain of 4.6%, its highest gain in two years. In Japan, Preliminary Industrial Production has posted four straight declines and the markets expect a sharp drop of 2.5%. Retail sales are projected to edge higher to 1.4%. On Thursday, the U.S. will post Advance GDP and unemployment claims.

There were no surprises from Powell’s testimony before a senate committee on Tuesday, as Powell preached patience with regard to changes in interest rates. Powell stated that the Fed was in “no rush to make a judgment” and made reference to “conflicting signals in the economy”. The labor picture remains bright, with strong hiring and low unemployment. At the same time, consumer spending and housing data have been soft. The markets are expecting the Fed to remain on the sidelines in May and June, meaning that the first hike of 2019 will not come before the second half of the year.

Inflation remains stubbornly low in Japan. Annual core consumer inflation was just 0.8% in January, as the BoJ has been unable to boost inflation to its target of around 2%. The BoJ has long stuck to its current monetary policy, but there are dissenting voices calling for change. On Wednesday, BoJ member Goushi Kataoka called on the bank to increase stimulus in order to achieve its inflation target. However, unless BoJ Governor Kuroda decides to take stronger easing steps, current monetary policy will remain in place.

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USD/JPY Fundamentals

Wednesday (February 27)

• 8:30 US Goods Trade Balance. Estimate -74.1B. Actual -79.5B
  
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 1.1%
  
• 10:00 US Fed Chair Powell Testifies
• 10:00 US Factory Orders. Estimate 1.5%. Actual 0.1%
  
• 10:00 US Pending Home Sales. Estimate 0.7%. Actual 4.6%
  
• 10:30 US Crude Oil Inventories. Estimate 2.8M
• 18:50 Japanese Preliminary Industrial Production. Estimate -2.5%
• 18:50 Japanese Retail Sales. Estimate 1.4% 

Thursday (February 28)

• 8:30 US Advance GDP. Estimate 2.6%
• 8:30 US Unemployment Claims. Estimate 221K
• 18:30 Japanese Tokyo Core CPI. Estimate 1.0%
• 18:30 Japanese Capital Spending. Estimate 4.5%
• 20:15 US Fed Chair Powell Speaks

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, February 27, 2019

USD/JPY February 27 at 10:20 EST

Open: 111.59 High: 110.88 Low: 110.36 Close: 110.87

USD/JPY Technical

USD/JPY was flat in the Asian session. In the European session, the pair posted small losses but then rebounded. USD/JPY has posted gains in the North American session

• 110.28 is providing support
• 110.90 is the next resistance line
• Current range: 110.28 to 110.90

Further levels in both directions:

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

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