USD/JPY – Japanese yen dips, inflation reports next

The U.S dollar has posted broad gains in Thursday trade, and USD/JPY has also moved higher. In the North American session, the pair is trading at 111.14, up 0.53% on the day. In the U.S, employment claims edged lower to 210 thousand, beating the estimate of 215 thousand. New Home Sales fell to 627 thousand, well short of the estimate of 641 thousand. This was the second housing report in as many days to miss expectations. Later in the day, Japan releases two inflation reports. National Core CPI and the Services Producer Price Index are expected to post gains of 0.9% and 1.2%, respectively. On Friday, Federal Reserve Chair Jerome Powell speaks at the Jackson Hole gathering of central bankers. As well, the U.S releases durable goods reports.

Despite an ultra-accommodative monetary policy, Japanese inflation remains stubbornly low. The BoJ’s target of just below 2 percent remains elusive, so there is no pressure on policymakers to even contemplate a rate hike in the near future. Still, inflation has moved upwards, and the Services Producer Price Index has strengthened in three straight releases, reaching 1.2% in June. The indicator is expected to post another gain of 1.2% in July. If Thursday’s inflation reports are stronger than expected, the yen could recover some of the losses recorded earlier in the day.

The Federal Reserve released the minutes of its July meeting, at which policymakers maintained the benchmark rate. The minutes noted that the U.S economy remains strong and hinted that the Fed would raise rates in September. However, policymakers added that there plan to continue with gradual rate increases could have to be halted if the global trade war worsened, as the trade war represented a major downside risk to the U.S economy. Fed Chair Jerome Powell will address the Jackson Hole Symposium on Friday, and investors will be listening carefully. Powell is expected to refer to trade tensions, as well as the fact that inflation and wage growth have lagged, despite a booming U.S economy. The minutes have cemented a rate hike in September, with market odds currently at 96%. The likelihood of a December rate hike stands at 57%.

Tariffs support U.S dollar

USD/JPY Fundamentals

Thursday (August 23)

• 8:30 US Unemployment Claims 215K. Actual 210K
• 9:00 US HPI. Estimate 0.3%. Actual 0.2%
• 9:45 US Flash Manufacturing PMI. Estimate 55.1. Actual 54.5
• 9:45 US Flash Services PMI. Estimate 55.9. Actual 55.2
• 10:00 US New Home Sales. Estimate 643K. Actual 627K
• 10:30 US Natural Gas Storage. Estimate 47B. Actual 48B
• 19:30 Japanese National Core CPI. Estimate 0.9%
• 19:50 Japanese Services Producer Price Index. Actual 1.2% 
• Day 1 – Jackson Hole Symposium

Friday (August 24)

• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate -0.7%
• 10:00 Federal Reserve Chair Powell Speaks
• Day 2 – Jackson Hole Symposium

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, August 23, 2018

USD/JPY August 23 at 11:50 DST

Open: 110.55 High: 111.29 Low: 110.52 Close: 111.14

USD/JPY Technical

In the Asian session, USD/JPY edged higher. The pair was flat in the European session and has posted further gains in North American trade

• 110.21 is providing support
• 111.22 was tested in resistance earlier. It is a weak line

Further levels in both directions:

• Below: 110.21, 109.21 and 108.11
• Above: 111.22, 112.30, 113.75 and 114.73
• Current range: 110.21 to 111.22

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