USD/JPY – Yen Steady as US Mfg. and Consumer Spending Reports Disappoint

USD/JPY has posted slight gains on Monday. In the North American session, the pair is trading at 111.60. On the release front, Japanese Final Manufacturing PMI improved to 52.7, close to the estimate of 52.8 points. Later in the day, the BoJ will publish the minutes of its March policy meeting. In the US, ISM Manufacturing PMI dropped to 54.8, short of the estimate of 56.6 points. This marked a 4-month low. US Personal Spending dipped to 0.0%, shy of the forecast of 0.2%. US Treasury Secretary Steven Mnuchin will deliver remarks at the Milken Conference in Los Angeles.

The US economy has hit a bump on the road, underscored by a disappointing Advance GDP for the first quarter. The economy expanded at just 0.7%, well below the forecast of 1.3%. Consumer indicators have also been softer than expected. On Friday, Revised UoM Consumer Sentiment came in at 97.0, short of the estimate of 98.1 points. This echoed the CB Consumer Confidence report earlier in the week, which also missed expectations. Consumer spending is also raising concerns, and Personal Spending dipped to 0.0% in March, the first time the indicator hasn’t posted a gain since July 2016. Key employment data, highlighted by Nonfarm Payrolls, will be released on Friday. If these indicators miss expectations, the US dollar could suffer broad losses.

The lights will stay on in Washington after all, after a week of intense negotiations on Capitol Hill, Lawmakers reached an agreement which averts a partial government shutdown. The short-term spending deal, which has bipartisan support, provides funding for government services until September 30th. The deal does not include any funding for a border wall with Mexico, marking a clear concession on the part of President Trump. Still, after a rocky 100 days in office, Trump could ill afford the embarrassment of the federal government running out of funds so early on his watch.

Analysts will be combing through the BoJ minutes from the March meeting, looking for clues about the BoJ’s monetary plans. Last week the BoJ indicated it plans more of the same, as it maintained interest rates at -0.10%. The BoJ sounded optimistic about the economy, but acknowledged that its ultra-loose monetary stance was unlikely to change in the near future. The BoJ is maintaining its asset-purchase program at 80 trillion yen annually, dampening hopes that the central bank might taper the purchases in response to an improving economy. Analysts noted that the BOJ’s quarterly outlook report said that the economy was moving towards “economic expansion”, the first time the report has used the word “expansion” since 2008. The central bank will likely hold course unless inflation levels move closer to the BoJ’s target of about 2%.

USD/JPY Fundamentals

Sunday (April 30)

• 20:30 Japanese Final Manufacturing PMI. Estimate 52.8. Actual 52.7

Monday (May 1)

• 8:30 US Core PCE Price Index. Estimate -0.1%. Actual -0.1%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.0%
• 8:30 US Personal Income. Estimate 0.4%. Actual 0.2%
• 9:45 US Final Manufacturing PMI. Estimate 52.8. Actual 52.8
• 10:00 US ISM Manufacturing PMI. Estimate 56.6. Actual 54.8
• 10:00 US Construction Spending. Estimate 0.5%. Actual -0.2%
• 10:00 US ISM Manufacturing Prices. Estimate 66.5. Actual 68.5
• 10:45 US Treasury Secretary Steven Mnuchin Speech
• Tentative – US Loan Officer Survey
• 19:50 Japanese Monetary Base. Estimate 21.2%
• 19:50 BoJ Monetary Policy Meeting Minutes

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, May 1, 2017

USD/JPY May 1 at 10:50 EST

Open: 111.30 High: 111.92 Low: 111.30 Close: 111.58

USD/JPY Technical

USD/JPY posted gains in the Asian session. The pair showed limited movement in the European session and has edged lower in North American trade

• 110.94 is providing support
• 112.57 is the next line of resistance
• Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 109.77, 108.54 and 107.49
•  Above: 112.57, 113.55 and 114.96

OANDA’s Open Positions Ratio

In the Monday session, USD/JPY long positions have a majority (57%). This is indicative of trader bias towards USD/JPY breaking out and posting gains.

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.