USD/JPY – Japanese yen gains ground on soft US inflation report

The Japanese yen has posted gains in the Wednesday session, erasing most of the losses seen on Tuesday. In North American trade, the pair is trading at 111.29, down 0.29% on the day. In economic news, Japanese BSI Manufacturing Index rebounded with a gain of 6.5, but this fell short of the estimate of 8.0 points. In the U.S., PPI and Core PPI both came in at -0.1%, missing their estimates. Later in the day, Japan releases Core Machinery Orders and PPI. On Thursday, the U.S publishes CPI as well as unemployment claims.

The Japanese economy showed strong expansion in the second quarter. GDP gained 0.7%, matching the estimate. This was an impressive rebound after a decline of 0.2% in Q1. On an annualized basis, GDP in Q2 was revised upwards to 3.0%, up from 1.9%. This gain marked the strongest gain in over two years. The Bank of Japan meets next week and is expected to hold its short-term interest rate target at -0.1 percent and a pledge to guide long-term rates near zero percent.

The U.S-China trade war has been on pause, but could heat up again at any time. The ball is currently in the corner of President Trump, who has threatened to impose tariffs on $200 billion worth of Chinese tariffs. The time period for public consultations ended last week, which means that Trump is free to announce another round of tariffs at any time. Despite fears that the trade war could trigger a recession, trade between the U.S and China actually increased in August. The dollar has benefited from the global trade war, and further tariffs against China could unnerve investors and propel the greenback upwards.

CAD rallies on Nafta optimism

Channel one’s confidence

USD/JPY Fundamentals

Tuesday (September 11)

• 19:50 Japanese BSI Manufacturing Index. Estimate 8.0. Actual 6.5

Wednesday (September 12)

• 8:30 US PPI. Estimate 0.3%. Actual -0.1%
• 8:30 US Core PPI. Estimate 0.2%. Actual -0.1%
• 10:30 US Crude Oil Inventories. Estimate -1.3M
• 12:45 US FOMC Member Lael Brainard
• 13:01 US 10-year Bond Auction
• 14:00 US Beige Book
• 19:50 Japanese Core Machinery Orders. Estimate 5.6%
• 19:50 Japanese PPI. Estimate 3.1%

Thursday (September 13)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 210K
• 10:00 US FOMC Member Randal Quarles Speaks
• 10:30 US Natural Gas Storage. Estimate 65B
• 13:01 30-year Bond Auction
• 13:15 US FOMC Member Raphael Bostic Speaks
• 14:00 US Federal Budget Balance. Estimate -169.8B

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, September 12, 2018

USD/JPY September 12 at 10:55 DST

Open: 111.60 High: 111.65 Low: 111.22 Close: 111.29

USD/JPY Technical

USD/JPY inched lower in the Asian session and was flat in European trade. The pair has posted slight losses in the North American session

• 111.22 was tested earlier in support. It is a weak line
• 112.30 is the next resistance line

Further levels in both directions:

• Below: 111.22, 110.21, 109.21 and 108.28
• Above: 112.30, 113.75 and 114.73
• Current range: 111.22 to 112.30

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