USD/JPY – Yen dips despite weak US consumer inflation

USD/JPY has posted gains in the Thursday session, erasing the losses seen on Wednesday. In North American trade, the pair is trading at 111.84, up 0.52% on the day. In economic news, Japanese Core Machinery Orders jumped 11.0%, its sharpest gain since January 2016. Japanese PPI ticked lower to 3.0%, just shy of the forecast of 3.1%. In the U.S, key consumer inflation reports missed their mark. CPI came in at 0.2%, shy of the estimate of 0.3%. Core CPI dipped lower to 0.1%, missing the forecast of 0.2%. Unemployment claims sparkled with a reading of 203 thousand, beating the forecast of 213 thousand. On Friday, the U.S release retail sales and UoM Consumer Sentiment.

The Japanese economy showed strong expansion in the second quarter. GDP gained 0.7%, matching the estimate. This was an impressive rebound after a decline of 0.2% in Q1. On an annualized basis, GDP in Q2 was revised upwards to 3.0%, up from 1.9%. This gain marked the strongest gain in over two years. Despite the good economic news, the Bank of Japan rate meeting on September 18-19 is likely to be a non-event. Policymakers are expected to maintain the short-term interest rate target at -0.1 percent and a pledge to guide long-term rates near zero percent. With regard to long-term monetary policy, the menu is likely to consist of “more of the same”. With the government planning to introduce a sales tax in 2019, the BoJ will want to stay on the sidelines. This could mean that interest rates will not be adjusted before 2020.

The U.S labor market remains at full capacity. The unemployment rate is at a remarkable 3.8% and unemployment claims were almost unchanged at 204 thousand, another excellent reading. Despite the strong employment front and a booming economy, inflation remains well short of the Federal Reserve’s target of 2 percent. In August, CPI and Core CPI came in at 0.1% and 0.2%, respectively, falling short of their estimates. The markets are braced for soft consumer spending data on Friday, which could send the dollar lower.

U.S core inflation unexpectedly cools

CBRT takes the focus off BoE and ECB meetings

USD/JPY Fundamentals

Wednesday (September 12)

• 19:50 Japanese Core Machinery Orders. Estimate 5.6%. Actual 11.0%
• 19:50 Japanese PPI. Estimate 3.1%. Actual 3.0%

Thursday (September 13)

• 8:30 US CPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Unemployment Claims. Estimate 210K. Actual 204K
• 10:00 US FOMC Member Rafael Bostic Speaks
• 10:30 US Natural Gas Storage. Estimate 65B
• 13:01 30-year Bond Auction
• 13:15 US FOMC Member Raphael Bostic Speaks
• 14:00 US Federal Budget Balance. Estimate -169.8B

Friday (September 14)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Import Prices. Estimate -0.2%
• 9:15 US Capacity Utilization Rate. Estimate 78.3%
• 9:15 US Industrial Production. Estimate 0.3%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 96.7
• 10:00 US Business Inventories. Estimate 0.5%
• 10:00 Preliminary UoM Inflation Expectations

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, September 13, 2018

USD/JPY September 13 at 11:00 DST

Open: 111.26 High: 111.90 Low: 111.17 Close: 111.84

USD/JPY Technical

USD/JPY ticked higher in the Asian and European sessions. The pair has posted further gains in North American trade

• 111.22 is providing support
• 112.30 is the next resistance line

Further levels in both directions:

• Below: 111.22, 110.21, 109.21 and 108.28
• Above: 112.30, 113.75 and 114.73
• Current range: 111.22 to 112.30

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