USD/JPY – US Jobless Claims Shines, Consumer Confidence Misses Expections

USD/JPY is showing little net change on Wednesday, as the pair trades at 122.60 in the North American session. In economic news, it’s a busy day ahead of the Thanksgiving holiday on Thursday. Unemployment Claims and Core Durable Goods posted strong readings, but UoM Consumer Sentiment missed expectations. There are no Japanese releases on Wednesday, but we’ll get a look at inflation indicators on Thursday, led by Tokyo Core CPI.

The US released several key releases on Wednesday, to mixed reviews. Unemployment Claims plunged to 260 thousand, well off the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. UoM Consumer Sentiment improved to 91.3 points, but the markets were overly optimistic, as the estimate stood at 93.2 points. This consumer confidence indicator comes on the heels of CB Consumer Confidence, which dropped to 90.4 points, nowhere close to the estimate of 99.3 points. These weak consumer confidence readings could raise concerns, as soft consumer confidence numbers could translate into weaker consumer spending, which is a key driver of economic growth.

The Bank of Japan continues to maintain its monetary policy, with an annual asset purchase target of about $60 billion. The BOJ minutes from the October meeting noted that the inflation target of 2.0% will not be met before 2018, with weak global growth and a planned sales tax weighing on economic growth. Policymakers said that the weak Japanese yen had not had a significant effect on the economy.

There were no surprises from US Preliminary GDP in the third quarter. The revised GDP report came in at 2.1%, very close to the Advanced GDP reading of 2.0%. Although these numbers pale in comparison to the blistering 3.7% we saw in Q2, they nonetheless point to respectable growth by the US economy in a difficult global environment. The positive GDP release means that a rate hike at the December policy meeting remains a strong possibility.

The Federal Reserve will next meet in December, and the guessing game continues regarding a possible rate increase. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. At the past two policy meetings, the vote against a rate hike was 9-1, but that clearly will not be the outcome at the December meeting. With the US economy posting mostly solid numbers, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves would not cause turbulence on the global markets. One fly in the ointment is that of persistently weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from Fed members will be under close scrutiny from the markets.

USD/JPY Fundamentals

Wednesday (Nov. 25)

• 13:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.5%
• 13:30 US Unemployment Claims. Estimate 273K. Actual 260K
• 13:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.0%
• 13:30 US Durable Goods Orders. Estimate 1.6%. Actual 3.0%
• 13:30 US Personal Spending. Estimate 0.3%. Actual 0.1%
• 13:30 US Personal Income. Estimate 0.4%. Actual 0.4%
• 14:00 US HPI. Estimate 0.5%. Actual 0.8% 
• 14:45 US Flash Services PMI. Estimate 55.2 points. Actual 56.5 points 
• 15:00 US New Home Sales. Estimate 500K. Actual 495K
• 15:00 US Revised UoM Consumer Sentiment. Estimate 93.2 points. Actual 91.3 points
• 15:00 US Revised UoM Inflation Expectations. Actual 2.7%
• 15:30 US Crude Oil Inventories. Estimate 1.2M. Actual 1.0M
• 17:00 US Natural Gas Storage. Estimate 5B

Upcoming Key Events

Thursday (Nov. 26)

• 23:30 Tokyo Core CPI. Estimate -0.1%

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Wednesday, November 25, 2015

USD/JPY November 25 at 18:45 GMT

USD/JPY 122.67 H: 122.93 L: 122.96

USD/JPY Technical

• 123.74 has some breathing room as the pair trades at lower levels.
• 122.40 continues to provide weak support.
• Current range: 122.40 to 123.74

Further levels in both directions:

• Below: 122.40, 121.50, 120.40 and 118.53
• Above: 123.74, 125.63 and 126.84

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged, reflective of a lack of movement from the pair. Long positions retain a majority of positions (56:44), which is indicative of trader bias towards the pair moving higher.

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.