USD/JPY – Yen Steady on Mixed Manufacturing Data

USD/JPY is almost unchanged in the Friday session. Currently, the pair is trading just above the 114 line. On the release front, Japanese manufacturing reports were mixed. Core Machinery Orders were dismal, with a sharp decline of 5.1%. However, Preliminary Machine Tool Orders rebounded and posted a strong gain of 4.4%. Later in the day, Japan releases Revised Industrial Production, with the estimate expected to improve to 1.5%. In the US, there are no events on the schedule, as the markets are closed for Martin Luther King Day.

The US consumer remains optimistic early in the New Year and ahead of the Trump inauguration later this week. The UoM Consumer Sentiment in January was solid, but the markets had expected a stronger performance. The indicator was almost unchanged at 98.1, shy of the forecast of 98.6. Despite the optimism, US retail sales were a mix during the December holiday season. Retail Sales improved to 0.6%, edging above the estimate of 0.5%. However, much of the increase in spending was attributable to automobile sales, at the expense of other sectors of the economy. This was reflected in Core Retail Sales (which excludes car sales), which remained stuck at 0.2%, compared to a forecast of 0.5%. Still, analysts are confident that a bullish consumer will translate into strong spending numbers in the next few months. There was good news on the inflation front, as wholesale prices (measured by PPI) rose 0.3%, beating the forecast of 0.1%. This marked the third rise in four months, as inflation is pointing upwards due to higher oil prices. If inflation continues to climb towards the Federal Reserve target of 2.0%, we could see the Fed step in and raise interest rates. On Thursday, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.  We’ll get another look at key inflation numbers on Wednesday, with the release of CPI and Core CPI.

Fed’s Harker Sees 3 Rate Hikes in 2017

USD/JPY Fundamentals

Sunday (January 15)

• 18:50 Japanese Core Machinery Orders. Estimate -1.3%. Actual -5.1%
• 18:50 Japanese PPI. Estimate -1.4%. Actual -1.2%
• 23:30 Japanese Tertiary Industry Activity. Estimate 0.2%. Actual 0.2%

Monday (January 16)

• 12:59 Japanese Preliminary Machine Tool Orders. Actual 4.4%
• 23:30 Japanese Revised Industrial Production. Estimate 1.5% 

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, January 16, 2017

USD/JPY January 16 at 9:10 EST

Open: 114.22 High: 114.45 Low: 113.57 Close: 114.18

USD/JPY Technical

• USD/JPY showed limited movement in the Asian session. In European trade, the pair lost ground but then recovered
• 113.80 is providing support
• 114.83 is the next resistance line
• Current range: 113.80 to 114.83

Further levels in both directions:

• Below: 113.80, 112.57 and 110.94
•  Above: 114.83, 115.88 and 116.88

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Monday session. Currently, short positions have a majority (54%), indicative of trader bias towards USD/JPY breaking out and moving to lower 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.