USD/JPY – Yen Gains on Dollar, Shrugs Off Weak Japanese Data

The Japanese yen has posted considerable gains in the Wednesday session. In North American trade, USD/JPY is trading at 106.60, down 0.68% on the day. On the release front, Japanese indicators were soft. Preliminary Industrial Production dropped 6.6%, compared to the estimate of -4.1%. Retail Sales fell to 1.6%, shy of the estimate of 2.3%. This marked a 3-month low. There was more bad news, as Housing Starts plunged 13.2%, missing the estimate of 4.5%. This reading was the worst since December 2014. Later in the day, Japan releases Final Manufacturing PMI. In the US, Preliminary GDP for Q4 came in at 2.5%, matching the forecast. Housing data continues to be a concern, as Pending Home Sales declined 4.7%, well off the estimate of 0.4%.

The US dollar recorded slight gains against the yen after Federal Reserve Chair Jerome Powell’s testimony before a congressional committee on Tuesday. Powell was cautious, saying that the Fed planned to continue its current policy of gradual rate increases, despite the stimulus of government spending and recent tax reform. Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with increases widely expected at the March and May meetings. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar broadly higher.

USD/JPY Fundamentals

Tuesday (February 27)

  • 18:50 Preliminary Industrial Production. Estimate -4.1%. Actual -6.6%
  • 18:50 Retail Sales. Estimate 2.3%. Actual 1.6%

Wednesday (February 28)

  • 00:00 Japanese Housing Starts. Estimate -4.5%. Actual -13.2%
  • 8:30 US Preliminary GDP. Estimate 2.5%. Actual 2.5%
  • 8:30 US Preliminary GDP Index. Estimate 2.4%. Actual 2.3%
  • 9:45 US Chicago PMI. Estimate 64.2. Actual 61.9
  • 10:00 US Pending Home Sales. Estimate 0.4%. Actual -4.7%
  • 10:30 US Crude Oil Inventories. Estimate 2.4M. Actual 3.0M
  • 19:30 Japanese Final Manufacturing PMI. Estimate 54.0

Thursday (March 1)

  • 8:30 US Personal Spending. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 226K
  • 10:00 US Fed Chair Powell Testifies
  • 10:00 US ISM Manufacturing PMI. Estimate 58.7

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, February 28, 2018

USD/JPY February 27 at 12:25 EST

Open: 107.33 High: 107.53 Low: 106.57 Close: 106.63

USD/JPY Technical

S3 S2 S1 R1 R2 R3
104.32 105.53 106.64 107.29 108.00 109.11

USD/JPY edged lower in the Asian and European sessions. The pair continues to lose ground in North American trade

  • 106.64 is under strong pressure as a support
  • 107.29 is the next resistance line

Current range: 106.64 to 107.29

Further levels in both directions:

  • Below: 106.64, 105.53 and 104.32
  • Above: 107.29, 108.00, 109.11 and 110.48

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Wednesday session. Currently, long positions have a majority (69%), indicative of trader bias towards USD/JPY reversing directions and moving lower.

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.