USD/JPY – Japanese yen retracts, household spending next

The Japanese yen has lost ground in the Wednesday session. In North American trade, USD/JPY is trading at 113.15, up 0.33% on the day. There are no data indicators in Japan or the United States. On Thursday, the focus will be on employment data, with the release of ADP nonfarm payrolls and unemployment claims. We’ll also get a look at ISM Non-Manufacturing PMI. Japan will release household spending and average cash earnings.

There was initial optimism in the markets after the U.S and China agreed to hold talks on resolving contentious trade issues. Most importantly, President Trump suspended his threat to raise tariffs on Chinese products as of December 1. However, the optimism proved to be short-lived, as investors are asking if the 90-day truce is simply a pause in the trade war between the world’s two largest economies. Risk appetite waned on Tuesday, and investors snapped up the safe-haven yen, which climbed to its highest level since November 20. Can the sides narrow their differences in just a few weeks? The U.S. and China remain far apart on a number of issues, including repeated charges by the U.S. that China is engaged in theft of U.S. intellectual property. The markets have been very sensitive to the trade dispute, and the upcoming negotiations between the U.S. and China, with the likely ups-and-downs, promise to have a significant effect on the direction of USD/JPY.

A detente in the U.S-China trade war cannot come soon enough for the Japanese economy, as key sectors of the economy are showing signs of weakness. Japan’s manufacturing sector slowed down in November, raising concerns about the strength of the economy. Manufacturing PMI slipped to 52.2, down from 52.9 in October. The ongoing global trade war is a primary factor in the weak reading, as Japanese companies which export to the U.S. or China have been hurt by 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.

It’s looking Ugly, hopefully time for a pause

Markets tumble after US sell-off

Investors fret over inverse yield curves and global growth

USD/JPY Fundamentals

Wednesday (December 5)

  • All Day – OPEC-JMMC Meetings
  • 14:00 US Beige Book
  • 20:15 US FOMC Member Quarles Speaks

Thursday (December 6)

  • All Day – OPEC Meetings
  • 8:15 US ADP Nonfarm Employment Change. Estimate 196K
  • 8:30 US Unemployment Claims. Estimate 226K
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2
  • 18:30 Japanese Household Spending. Estimate 1.2%
  • 18:30 US FOMC Member Williams Speaks
  • 18:45 US Federal Reserve Chair Powell Speaks
  • 19:00 Japanese Average Cash Earnings. Estimate 1.0%

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, December 5, 2018

USD/JPY December 5 at 10:40 EST

Open: 112.78 High: 113.23 Low: 112.65 Close: 113.21

USD/JPY Technical

S3 S2 S1 R1 R2 R3
110.28 111.20 112.30 113.75 114.73 115.50

In the Asian session, USD/JPY ticked lower but then bounced back with gains. The pair was flat in the European session and has posted small gains in North American trade

  • 112.30 is providing support
  • 113.75 is the next resistance
  • 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

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

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.