USD/JPY – Yen Dips Lower as US Inflation Beats Estimate

USD/JPY has edged lower in the Tuesday session. In North American trade, USD/JPY is trading at 113.63, down 0.22% on the day. In the US, inflation indicators were stronger than expected. PPI gained 0.4%, above the estimate of 0.1%, while Core PPI also came in at 0.4%, beating the forecast of 0.2%.Later in the day, Japan releases Preliminary GDP, with an estimate of 0.4%.On Wednesday, the US releases CPI and retail sales reports.

US Producer Price Index reports were stronger than expected in October. Core PPI and PPI remained unchanged at 0.4%, beating their estimates. PPI increased at an annualized rate of 2.8%, its fast gain since February 2012. Is inflation on the rise? We could get an answer as early as Wednesday, with the release of CPI and Core CPI reports. Inflation levels are being closely monitored by the Federal Reserve, as stronger inflation levels would likely result in a rate hike in early 2018. The markets are very bullish on higher rates, with a December hike priced in at 91% and a January raise priced in at 89%.

Prime Minister Shinzo Abe cruised to victory in the October election, and is expected to maintain his ‘Abenomics’ economic program. The program is based on three prongs – ultra-loose monetary easing, fiscal spending and structural reforms to the economy. The scheme has been in place since 2012, and is finally showing some results, as the Japanese economy continues to expand. However, inflation remains stubbornly low, and a strong labor market has not led to higher wages, which would help boost inflation. Companies continue to look for ways to spend their cash, such as buying foreign companies, but are reluctant to plow more funds into wages. Business confidence in the economy remains lukewarm, and businesses are reluctant to add to their fixed costs. The BoJ has urged companies to increase wages, but this is unlikely to occur until the business sector is convinced that the current economic rebound will be long-lasting.

USD/JPY Fundamentals

Tuesday (November 14)

• 5:00 BoJ Governor Haruhiko Kuroda Speaks
• 5:00 US Federal Chair Janet Yellen Speaks
• 6:00 US NFIB Small Business Index. Estimate 104.2. Actual 103.8
• 8:30 US PPI. Estimate 0.1%. Actual 0.4%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%
• 18:50 Japanese Preliminary GDP. Estimate 0.4%
• 18:50 Japanese Preliminary GDP Price Index. Estimate 0.1
• 18:50 Japanese Revised Industrial Production. Estimate 0.4%

Wednesday (November 15)

• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.0% 
• 8:30 US Empire State Manufacturing Index. Estimate 25.3

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, November 14, 2017

USD/JPY November 14 at 10:15 EDT

Open: 113.63 High: 113.91 Low: 113.32 Close: 113.37

USD/JPY Technical

USD/JPY was flat in the Asian session. In European trade, the pair posted gains but then retracted. USD/JPY pair has lost ground in the North American session.

• 112.57 is providing support
• 113.55 remains fluid. Currently, the line is in a resistance role.

Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.57, 111.53 and 110.10
• Above: 113.55, 114.49, 115.50 and 116.54

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement in the Tuesday session. Currently, short positions have a majority (54%), indicative of trader bias towards USD/JPY continuing to move downwards.

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.