USD/JPY – Yen Drops to 3-Week Lows, US CB Consumer Confidence Next

The Japanese yen has posted losses on Tuesday. Currently, USD/JPY is trading at 102.30, its highest level since early August. On the release front, today’s highlight is CB Consumer Confidence. The indicator is expected to remain steady, with a forecast of 97.2 points. Later in the day, Japan releases Preliminary Industrial Production. On Wednesday, the US will release two key events – ADP Nonfarm Employment Change and Pending Home Sales.

After an uneventful week, the Japanese yen dropped 120 points on Friday, as USD/JPY climbed close to the 102 level. The US dollar posted broad gains following Janet Yellen’s speech at the Jackson Hole gathering of central bankers. The Fed chair’s message to the markets was clearly upbeat, as she stated that the case for a rate increase had “strengthened in recent months”. Yellen noted that the economy was close to maximum employment, inflation was steady, and consumer spending remained solid. At the same time, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

Japan’s economy remains mired in deflation, as underscored by weak inflation numbers in August. Inflation levels have failed to move upwards, despite the government’s Abenomics program and radical monetary easing by the Bank of Japan earlier in the year. The government unveiled an ambitious stimulus plan this summer, but even if successful, it will take time for inflation to gain traction. Tokyo Core CPI, the primary gauge of consumer spending, continued its losing ways with a decline of 0.4% in August, shy of the estimate of -0.3%. Since May 2015, the indicator has managed just two gains, and both of those were a paltry 0.1%. National Core CPI posted a decline of -0.5%, short of the forecast of -0.4%. The news was better from BoJ Core CPI, which posted a gain of 0.5%. However, this was weaker than the previous release of 0.8%. 

Tuesday (August 30)

  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.1%
  • 10:00 US CB Consumer Confidence. Estimate 97.2
  • 19:50 Japanese Preliminary Industrial Production. Estimate 0.7%

Wednesday (August 31)

  • 8:15 US ADP Non-Farm Employment Change. Estimate 173K
  • 10:00 US Pending Home Sales. Estimate 0.7%

*Key events are in bold

USD/JPY for Tuesday, August 30, 2016

USD/JPY August 30 at 4:30 EDT

Open: 101.83 High: 102.45  Low: 101.74 Close: 102.34

USD/JPY Technical

S3 S2 S1 R1 R2 R3
98.95 99.71 101.20 102.36 103.73 104.99
  • USD/JPY has posted slight gains in the Asian and European sessions
  • 102.36 was tested in resistance earlier and is a weak line
  • 101.20 is providing support
  • Current range:101.20 to 102.36

Further levels in both directions:

  • Below: 101.20, 99.71, 98.95 and 97.78
  •  Above: 102.36, 103.73 and 104.99

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement on Tuesday. Currently, long positions have a strong majority (69%), indicative of trader bias towards USD/JPY continuing to move to higher ground.

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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.