USD/JPY – Japanese yen continues to slide after weak inflation report

USD/JPY has gained ground in the Wednesday session. In the North American session, the pair is trading at 110.76, up 0.25% on the day. On the release front, Japanese PPI disappointed with a gain of 0.6% in January, shy of the estimate of 1.0%. This was the lowest level since January 2017. Later in the day, Japan releases GDP for the fourth quarter, with an estimate of 0.4%. In the U.S., consumer inflation data for January was soft. CPI ticked up to 0.0%, shy of the estimate of 0.1%. Core CPI posted a gain of 0.2%, matching the estimate. On Thursday, the U.S. publishes retail sales and PPI.

Inflation levels in the U.S. remain low, despite a strong U.S. economy and strong labor market. CPI showed no change in January, and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

Are we close to a breakthrough in the U.S-China trade war? The crisis between the two largest economies in the world has rocked equity markets and dampened risk appetite. The U.S. has imposed 10% tariffs on Chinese goods and has threatened to raise the tariffs to a punishing 25% on March 1. Trade officials from the U.S. and China are meeting for a third round of negotiations, and U.S. Treasury Secretary Steven Mnuchin has joined the talks. There was positive news on Tuesday, as President Trump said that he could postpone the March 1 deadline if the trade talks made sufficient progress. If the negotiations yield an agreement, risk appetite will jump and the safe-haven yen could head lower.

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USD/JPY Fundamentals

Tuesday (February 12)

• 18:50 Japanese PPI. Estimate 1.0%. Actual 0.6%

Wednesday (February 13)

• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 10:30 US Crude Oil Inventories. Estimate 2.1M
• 14:00 US Federal Budget Balance. Estimate -10.5B
• 18:50 Japanese Preliminary GDP. Estimate 0.4%
• 18:50 Japanese Preliminary GDP Price Index. Estimate -0.4%

Thursday (February 14)

• 8:30 US Core Retail Sales. Estimate 0.0%
• 8:30 US Retail Sales. Estimate 0.1%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Core PPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 225K

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, February 13, 2019

USD/JPY February 13 at 10:00 EST

Open: 110.49 High: 110.89 Low: 110.43 Close: 110.76

USD/JPY Technical

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

• 110.28 is providing weak support
• 110.90 is under pressure in resistance
• Current range: 110.28 to 110.90

Further levels in both directions:

• Below: 110.28, 109.37, 108.11 and 107.36
• Above: 110.90, 112.16 and 112.93

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