USD/JPY – Yen Dips as US Manufacturing PMI Jumps

USD/JPY has posted gains in the Monday session, gaining 0.74%. In the North American session, the pair is trading slightly above the 113 level. On the release front, Japanese Tankan Indices were both within expectations. The Tankan Manufacturing Index improved to 17, easily beating the estimate of 12. The Tankan Services Index improved to 23, just shy of the forecast of 24. Japanese Consumer Confidence softened to 43.3, missing the estimate of 43.9. In the US, ISM Manufacturing PMI climbed to 57.8, beating the estimate of 55.0.

The Japanese economy has shown some improvement, but consumer spending and inflation remain sore points. Japanese retail sales slowed to just 2.0% in May, compared to 3.2% a month earlier. The weak figure points to a Japanese consumer who is hesitant to open the purse strings. Wages have been stagnant, which has hampered consumer spending, a key driver of economic growth. Inflation is stuck below 1 percent, well below the BoJ’s target of 2 percent. Tokyo Core CPI, the primary gauge of consumer inflation, edged down to 0.0%, below the estimate of 0.2%. The index has posted just one gain in the past 18 months, underscoring that the BoJ’s ultra-loose monetary policy has not been able to raise inflation levels anywhere near the bank’s target of 2 percent.

There was no getting around the fact that the US economy slowed down in the first quarter, but there was some good news, as the revised GDP reading was raised to 1.4%, better than the initial estimate of 1.2% in May. The improvement was attributed to stronger consumer spending and an increase in exports. Earlier in the year, the markets were braced for a very poor quarter, with the first estimate in April projecting a gain of only 0.7%. Inflation remains stubbornly low, and consumer spending is also soft, despite high consumer confidence levels. In May, Personal Spending softened to 0.1%, down from 0.4% a month earlier. If inflation levels don’t show some improvement, the Federal Reserve may have second thoughts about a December rate hike.

USD/JPY Fundamentals

Sunday (July 2)

• 19:50 Japanese Tankan Manufacturing Index. Estimate 15. Actual 17
• 19:50 Japanese Tankan Non-Manufacturing Index. Estimate 24. Actual 23
• 20:30 Japanese Final Manufacturing PMI. Estimate 52.0. Actual 52.4

Monday (July 3)

• 1:00 Japanese Consumer Confidence. Estimate 43.9. Actual 43.3
• 9:45 US Final Manufacturing PMI. Estimate 52.1. Actual 52.0
• 10:00 US ISM Manufacturing PMI. Estimate 55.0. Actual 57.8
• 10:00 ISM Construction Spending. Estimate 0.3%. Actual 0.0%
• 10:00 US ISM Manufacturing PMI. Estimate 58.5. Actual 55.0
• All Day – US Total Vehicle Sales. Actual 16.5M
• 19:50 Japanese Monetary Base. Estimate 19.2%
• 23:45 Japanese 10-y Bond Auction

*All release times are GMT

*Key events are in bold

USD/JPY for Monday, July 3, 2017

USD/JPY July 3 at 10:40 EDT

Open: 112.39 High: 113.28 Low: 112.10 Close: 113.22

USD/JPY Technical

USD/JPY edged higher in the Asian session. The pair posted has posted stronger gains in the European and North American sessions

• 112.57 is providing support
• 113.55 is a weak resistance line
• Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.57, 110.94, 109.77 and 108.13
•  Above: 113.55, 114.37 and 115.51

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight movement towards short positions. Currently, long positions have a majority (56%), indicative of trader bias towards USD/JPY continuing to move to higher 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.