USD/JPY – Japanese yen ticks higher as inflation meets expectations

The Japanese yen is unchanged in the Tuesday session. In the North American trade, USD/JPY is trading at 109.95, up 0.16% on the day. In Japan, the focus is on inflation data. The Services Producer Price Index edged up to 1.0%, matching the forecast. The Bank of Japan Core CPI, the bank’s preferred inflation index, dipped to 0.5%, shy of the estimate of 0.6%. In the U.S, CB Consumer Confidence dropped to 126.4, shy of the estimate of 127.6 points. On Wednesday, the U.S releases durable goods orders and Japan will publish retail sales.

BoJ policymakers appear in no hurry to make any changes to monetary policy. This was underscored in the summary of opinions of the June policy meeting, which was published on Monday. The summary, which precedes the minutes, indicated that policymakers urged the bank to ‘patiently continue’ its massive easing program. At the same time, some board members expressed concern that the program had undesirable side effects, such as ultra-low rates hurting the profitability of banks. At the June meeting, the bank maintained monetary policy but lowered its inflation forecast. With inflation mired below the BoJ’s target of just under 2 percent, the BoJ is widely expected to continue with its easing scheme well into 2019.

With global trade tensions worsening by the week, central bankers have sounded the alarm that global growth and financial stability is at risk. This was the message on Sunday from the Bank of International Settlements (BIS), which acts as an umbrella group for some 60 central banks. The BIS also warned that the escalating trade war could have negative side effects on the currency markets. With regard to Japan, the BIS warned that Japanese banks were vulnerable to funding shocks, since the banks have doubled their borrowing and lending in dollars since 2007, but do not have adequate dollar deposits to cover these loans. At the same time, analysts have noted that these are high-quality loans and in a pinch, the banks can always rely on the Bank of Japan for any dollar shortfalls.

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USD/JPY Fundamentals

Monday (June 25)

• 19:50 Japanese Services Producer Price Index. Estimate 1.0%. Actual 1.0%

Tuesday (June 26)

• 1:00 BoJ Core CPI. Estimate 0.6%. Actual 0.5%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.9. Actual 6.6%
• 10:00 US CB Consumer Confidence. Estimate 127.6. Actual 126.4 
• 10:00 US Richmond Manufacturing Index. Estimate 15. Actual 20
• 13:00 US FOMC Member Rafael Bostic Speaks

Wednesday (June 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate -0.9%
• 19:50 Japanese Retail Sales. Estimate 1.2%

*All release times are DST

*Key events are in bold

USD/JPY for Tuesday, June 26, 2018

USD/JPY June 26 at 10:45 DST

Open: 109.78 High: 109.83 Low: 109.76 Close: 109.95

USD/JPY Technical

USD/JPY edged lower in the Asian session but has recovered in European trade. The pair is steady in North American trade

• 109.21 is providing support
• 110.21 is the next resistance line

Further levels in both directions:

• Below: 109.21, 108.13 and 107.01
• Above: 110.21, 111.22, 112.30 and 113.75
• Current range: 109.21 to 110.21

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