USD/JPY – Japanese yen steady, Tankan indices loom

The Japanese yen has posted small gains in the Wednesday session. In North American trade, USD/JPY is trading at 113.23, down 0.14% on the day. On the release front, Japanese Core Machinery Orders rebounded with a gain of 7.6%, but fell short of the forecast of 10.2%. Japanese PPI continues to lose ground, and dropped from 2.9% to 2.3%. This missed the estimate of 2.4%. In the U.S., consumer inflation reports softened in November, but matched the estimates. CPI dipped to 0.0 percent and Core CPI fell to 0.2 percent. On Thursday, the U.S releases unemployment claims and Japan publishes the Tankan manufacturing and services indices.

The ongoing U.S-China trade war has had a chilling effect on the Japanese manufacturing sector, as Japanese companies dealing with the U.S. and China have been slapped with higher tariffs. The BSI Manufacturing Index slipped to 5.5 in the third quarter, down from 6.5 in the second quarter. Preliminary Machine Tool Orders nosedived, with a reading of -16.5 percent. This was the sharpest decline since July 2016. On Thursday, we’ll get a look at the Tankan Manufacturing index, which is published every quarter. The key index has dropped for three straight quarters and another decline is expected, with an estimate of 18 points.

Only a few months ago, there was talk that the Federal Reserve could hike rates every quarter in 2019. However, signs of a slowdown in the U.S. economy have drastically changed matters, as the Fed is expected to scale back its “gradual rate hike” policy to just one hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the CME pegging the likelihood of a rate hike at 80%.

Risk appetite returns on trade hopes

Markets are waiting on a letter

May to face vote of no confidence

USD/JPY Fundamentals

Tuesday (December 11)

• 18:50 Japanese Core Machinery Orders. Estimate 10.2%. Actual 7.6%
• 18:50 Japanese PPI. Estimate 2.4%. Actual 2.3%
• 23:30 Japanese Tertiary Industry Activity. Estimate 0.9%. Actual 1.9%

Wednesday (December 12)

• 8:30 US CPI. Estimate 0.0%. Actual 0.0%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 10:30 US Crude Oil Inventories. Estimate -3.0M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -193.5B

Thursday (December 13)

• 8:30 US Unemployment Claims. Estimate 226K
• 18:50 Japanese Tankan Manufacturing Index. Estimate 18
• 18:50 Japanese Tankan Non-Manufacturing Index. Estimate 21
• 19:30 Japanese Flash Manufacturing PMI. Estimate 52.3
• 23:30 Japanese Revised Industrial Production. Estimate 2.8%

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, December 12, 2018

USD/JPY December 12 at 11:20 EST

Open: 113.38 High: 113.52 Low: 113.16 Close: 113.23

USD/JPY Technical

USD/JPY ticked higher in the Asian session but retracted in European trade. The pair has posted small losses in North American trade

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