USD/JPY – Japanese yen gains ground on strong inflation report

The Japanese yen has posted slight gains in the Friday session. In the North American session, USD/JPY is trading at 111.00, down 0.23% on the day. On the release front, Tokyo Core CPI edged higher in July, posting a gain of 0.8%. This beat the forecast of 0.7%. In the U.S, Advance GDP gained 4.1% in the second quarter, just shy of the estimate of 4.2%. This marked the strongest quarter of economic growth since 2014. Later in the day the U.S releases Consumer Sentiment, which is forecast to drop to 97.1 points.

It’s been a quiet week for the yen and the trend has continued in Friday trade. There was good news on the inflation front, as Tokyo Core CPI improved to 0.8%, its strongest gain in four months. Earlier, in the week, Services Producer Price Index improved for a third straight month, jumping to 1.2% in June. This beat the estimate of 1.0% and marked the strongest gain since March 2015. At the same time, BoJ Core Inflation, the BoJ’s preferred inflation indicator, dipped to 0.4%, its smallest gain since in 11 months. The Bank of Japan has stubbornly held to its inflation of target of just under 2.0%, but this goal remains elusive. The markets are not expecting any significant changes to the BoJ’s ultra-accommodative monetary policy until inflation levels move higher.

The U.S economy keeps on humming, and Friday’s Advance GDP for the second quarter reflected this, with an excellent gain of 4.1%. This is much higher than the 2.2% gain recorded in the first quarter. This reading was within market expectations, so the dollar wasn’t able to gain ground. Strong economic numbers have kept the U.S currency at high levels, despite recent remarks by President Trump saying that the dollar is too high and is hampering exports. These comments have weighed on the dollar, but usually for a brief time only, as the performance of the economy has talked louder than Trump’s tweets.

  Yen buoyed as inflation tops estimates

  U.S. Economy grew 4.1% rate in Q2

Thursday (July 26)

  • 19:30 Tokyo Core CPI. Estimate 0.7%. Actual 0.8%

Friday (July 27)

  • 8:30 US Advance GDP. Estimate 4.1%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 97.1

*All release times are DST

*Key events are in bold

USD/JPY for Friday, July 27, 2018

USD/JPY July 27 at 10:00 DST

Open: 111.23 High: 111.24 Low: 110.92 Close: 111.00

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.11 109.21 110.21 111.22 112.30 113.75

USD/JPY inched lower in the Asian session. The pair posted small gains in the European session but then retracted. USD/JPY is steady in the North American session

  • 110.21 is providing support
  • 111.22 remains fluid. Currently, it is a weak resistance line

Further levels in both directions:

  • Below: 110.21, 109.21 and 108.11
  • Above: 111.22, 112.30, 113.75 and 114.73
  • Current range: 110.21 to 111.22

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Kenny Fisher

Kenny Fisher

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