USD/JPY – Yen Steady at 112, Markets Eye CPI, Retail Sales

The Japanese yen has ticked higher in the Friday session. Currently, USD/JPY is trading at 1.1217, down 0.10% on the day. On the release front, there are no Japanese events on the schedule. It’s a busy day in the US, with the release of inflation, retail sales and consumer confidence reports.

Is inflation in Japan finally moving upward? Japanese PPI has steadily moved higher in 2017, and improved in September to 3.0%. Last week, Tokyo Core CPI, a key gauge of consumer inflation, has also shown improvement this year, and the September reading of 0.5% marked the highest gain since March 2015. The gains are linked to a stronger Japanese economy, and on Tuesday a BoJ report gave a thumbs-up to the economy, noting that exports were strong and consumer spending and construction had strengthened. The BoJ has not budged from its inflation target of 2 percent, although it has been forced to lower its inflation forecast a number of times. Earlier this month, the BoJ said that it does not expect its target to be met before 2020.

The Federal Reserve minutes, released on Wednesday, appeared to confirm that a December rate increase is on the way. The minutes showed that many policymakers felt that a December hike “was likely to be warranted”. However, some policymakers remain concerned about low inflation levels and said that inflation would be a consideration in their decision on a rate hike. The odds of a December hike have increased dramatically in the past few weeks, mostly in response to Fed Chair Yellen and other FOMC members expressing optimism that inflation will move upwards. On Wednesday, Kansas City Fed President Esther George went event further, saying that low inflation did not pose a problem, as the US economy was strong and the labor market was at full capacity. Investors will be carefully monitoring Friday’s CPI reports as well as the Fed reaction. Currently, fed futures have priced in a December hike at 87 percent.

USD/JPY Fundamentals

Friday (October 13)

• 8:30 US CPI. Estimate 0.6%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.9%
• 8:30 US Retail Sales. Estimate 1.7%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1
• 10:00 US Business Inventories. Estimate 0.7%
• 10:00 US Preliminary UoM Inflation Expectations
• Day 1 – IMF Meetings
• 10:25 US FOMC Member Charles Evans Speaks
• 10:25 US FOMC Member Robert Kaplan Speaks
• Tentative – US Federal Budget Balance. Estimate -1.0B

*All release times are GMT

*Key events are in bold

USD/JPY for Friday, October 13, 2017

USD/JPY October 13 at 7:10 EDT

Open: 112.29 High: 112.31 Low: 111.86 Close: 112.17

USD/JPY Technical

USD/JPY inched lower in Asian trade. In the European session, the pair edged lower but then recovered

• 110.94 is providing support
• 112.57 was tested earlier in resistance

Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 110.10 and 108.69
• Above: 112.57, 113.55, 114.49 and 115.50

OANDA’s Open Positions Ratios

USD/JPY ratio remains almost unchanged this week. Currently, short positions have a majority (58%), indicative of trader bias towards USD/JPY continuing to move to lower ground.

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.