USD/JPY – Little Activity as Japanese Inflation Reports Meet Expectations

The Japanese yen is unchanged on Friday, as USD/JPY trades in the mid-119 range. On the release front, the US will issue its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January. We’ll also get a look at Revised UoM Consumer Sentiment and Pending Home Sales. In Japan, today’s only event was Housing Starts. The indicator posted a weak reading of -13.0%.

Japanese data was a mix on Thursday. Inflation indicators met expectations in February. Tokyo Core CPI was unchanged at 2.2%, matching the forecast. National Core CPI posted an identical gain, close to the estimate of 2.4%. Consumer spending looked awful. Household Spending plunged 5.1%, worse than the estimate of -4.0%. Retail Sales had its worst showing since May, with a decline of 2.0%. The markets had expected a softer decline of 1.2%. There was some good news on the manufacturing front, as Preliminary Industrial Production climbed 4.0%, well above the forecast of 2.9%.

Thursday’s US inflation and job numbers were not impressive. US inflation indicators continue to struggle. CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. On the employment front, there was disappointing news, as Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall, but wages and inflation need to move higher before the Fed raises interest rates.

USD/JPY for Friday, February 27, 2015

USD/JPY February 27 at 12:20 GMT

USD/JPY 119.34 H: 119.44 L: 119.12

USD/JPY Technical

• USD/JPY has shown limited movement in the Asian and European sessions.
• 118.69 is an immediate support line. 117.49 is next.
• 119.83 is a weak resistance line. 120.63 is stronger.
• Current range: 118.69 to 119.83

Further levels in both directions:

• Below: 118.69, 117.49, 116.69, 115.56 and 113.83
• Above: 119.83, 120.63, 121.69 and 122.19

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Friday. This is not consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the US dollar breaking out and moving to higher ground.

USD/JPY Fundamentals

• 5:00 Japanese Housing Starts. Estimate -11.1%. Actual -13.0%.
• 13:30 US Preliminary GDP. Estimate 2.1%.
• 13:30 US Preliminary GDP Price Index. Estimate 0.0%.
• 14:45 US Chicago PMI. Estimate 58.4 points.
• 15:00 US Pending Home Sales. Estimate 2.5%.
• 15:00 US Revised UoM Consumer Sentiment. Estimate 94.2 points.
• 15:00 US Revised UoM Inflation Expectations.
• 15:15 US FOMC Member William Dudley Speaks.
• 18:30 US FOMC Member Stanley Fischer Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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.