USD/JPY – Dollar Climbs to 105 on Soft Japanese Retail Sales, BOJ Meeting Next

USD/JPY has moved higher in the Monday session, as the pair trades at the 105 line. In economic news, Japanese Retail Sales posted a sharp drop of 1.7%, slightly above the estimate of -1.9%. Preliminary Industrial Production and Housing Starts both beat their estimates. In the US, Personal Spending climbed 0.5%, matching the forecast. On Tuesday, the US will release ISM Manufacturing PMI.

The Japanese consumer remains in a surly mood, continuing to hold her purse strings tight in uncertain economic times. Retail Sales continue to contract, as the September reading of -1.9% was only slightly better than the August report of -2.1%. The indicator has managed only one gain in 2016. The Bank of Japan is in the spotlight, as the central bank holds a policy meeting on Monday and Tuesday. The bank will release a rate statement and set interest rates during the Asian session on Tuesday. Analysts expect the BoJ to maintain interest rates at -0.10%. As well, the bank’s asset-purchase program is expected to remain at JPY 80 billion/mth. The markets will be monitoring the rate statement and follow-up press conference. If the BoJ does make any changes to monetary policy or hints at future moves, we could see some volatility from USD/JPY.

US Advance GDP jumped 2.9 percent in the third quarter, and the rosy number will be great news for Fed policymakers who want to raise rates in December. Currently, a hike is priced in at impressive 72 percent. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%. Inflation levels, however, remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but is unlikely to make any rate moves just before the US presidential election.

USD/JPY Fundamentals

Sunday (October 30)

• 19:50 Japanese Preliminary Industrial Production. Estimate 0.9%. Actual 0.0%
• 19:50 Japanese Retail Sales. Estimate -1.7%. Actual -1.9%
• 1:00 Japanese Housing  Starts. Estimate 5.3%. Actual 10.0%

Monday (October 31)

• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.5%. Actual 0.5%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 9:45 US Chicago PMI. Estimate 54.1
• Tentative – US Loan Officer Survey

Tuesday (November 1)

• Tentative – BoJ Outlook Report
• Tentative – BoJ Policy Rate
• Tentative – BoJ Monetary Policy Statement
• Tentative – BoJ Press Conference
• 10:00 US ISM Manufacturing PMI. Estimate 51.8

*All release times are EDT

*Key events are in bold

USD/JPY for Monday, October 31, 2016

USD/JPY October 31 at 8:15 EDT

Open: 104.57 High: 105.08 Low: 104.52 Close: 105.04

USD/JPY Technical

• USD/JPY has posted slight gains in the Asian and European sessions
• 104.32 is providing support
• There is resistance at 105.44
• Current range: 104.32 to 105.44

Further levels in both directions:

• Below: 104.32, 103.02, 102.36 and 101.20
•  Above: 105.44, 106.72 and 107.49

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Monday. Currently, long positions have a majority (55%), indicative of slight trader bias towards USD/JPY continuing to move to higher levels.

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.