JPY/USD – Yen Posts Gains As Japanese Inflation Data Within Expectations

USD/JPY has reversed direction on Friday, as the pair has posted modest losses. In Friday’s European session the pair is trading in the mid-98 range. The yen received a boost as Japanese inflation indicators were within expectations on Thursday. Today’s US highlight is Revised UoM Consumer Sentiment. The markets are bracing for a weak release in August. There are no Japanese releases on Friday.

After years of deflation which have hobbled the Japanese economy, we continue to see signs of inflationary trends, as the economy responds to the government’s aggressive economic platform. On Thursday, National Core CPI continued to rise, posting a gain of 0.8%. This beat the estimate of 0.7%. Tokyo Core CPI was not as strong, dropping from 0.4% to 0.2% in August. However, the reading was close to the estimate of 0.3%. Earlier in the week, the Corporate Services Price Index rose 0.6% in August, edging out the estimate of 0.5%. These indicators has been posting releases below zero for years, but recent readings indicate that the economy is moving closer to the BOJ’s goal of reaching 2.0% annual inflation.

In the US, Thursday’s numbers were a mix. Unemployment Claims improved slightly last week, from 309 thousand to 305 thousand last week. This beat the estimate of 319 thousand. The news was nowhere as positive from in the US housing sector, as Pending Home Sales declined by 1.6%, well off the estimate of -0.9%. This was the sharpest gain we’ve seen from the housing indicator this year. Revised UoM Consumer Sentiment will wrap up the week. The markets are braced for a reading below the 80-point level, which has not happened since March. Will the indicator surprise the markets with a strong reading?

The markets were counting on a QE tapering in September, but this was not to be as the Federal Reserve didn’t make a move. The Fed was of the opinion that US economic data, particularly employment numbers, did not justify scaling down QE at this time. So with all the speculation about QE taper behind us, what can we expect from the Federal Reserve? After the FOMC Statement, Federal Reserve Bank of St. Louis President James Bullard shed some light on the dramatic move (or lack of) by the Federal Reserve. Bullard said the vote was close, but weaker US numbers led to a decision not to taper. He added that the Fed may go ahead with “small” reductions to QE at its next policy meeting in October.

USD/JPY for Friday, September 27, 2013

USD/JPY September 27 at 11:40 GMT

USD/JPY 98.51 H: 98.98 L: 98.46

USD/JPY Technical

• USD/JPY has lost ground and is trading in the mid-98 range in Friday trading. The pair darted above the 99 line in the Asian session but has since retracted.
• The pair continues to face resistance at 99.45. This is followed by resistance at the all-important 100 level.
• On the downside, USD/JPY is again testing support at 98.43.There is stronger support at 97.83, which has remained intact since late August.
• Current range: 98.43 to 99.45

Further levels in both directions:

• Below: 98.43, 97.83, 97.18 and 96.20
• Above: 99.45, 100, 100.85, 101.66 and 102.53

OANDA’s Open Positions Ratio

USD/JPY ratio continues to be made up of a solid majority of long positions, indicative of a strong trader bias towards the US dollar moving to higher ground.

USD/JPY has been reversing direction during the week and currently, the yen is moving higher against the dollar. We could see some volatility from the pair later in the day, as the US releases important consumer sentiment data.

USD/JPY Fundamentals

• 1:15 US FOMC Member Esther George speaks at economic forum in Denver. George is considered hawkish in stance.
• 9:45 US FOMC Member Charles Evans speaks at a bank conference in Oslo, Norway. Evans is considered dovish in stance.
• 12:30 US Core PCE Price Index. Estimate 0.1%.
• 12:30 US FOMC Member Eric Rosengren speaks at a financial conference in New York. Rosengren is considered dovish in stance.
• 12:30 US Personal Spending. Estimate 0.3%.
• 12:30 US Personal Income. Estimate 0.5%.
• 13:55 Revised UoM Consumer Sentiment. Estimate 78.2 points.
• 13:55 Revised UoM Inflation Expectations.
• 14:55 US FOMC Member Charles Evans speaks at a bank conference in Oslo, Norway. Evans is considered dovish in stance.
• 18:00 US FOMC Member Dudley speaks at an event in Syracuse. Dudley is considered neutral in stance.

*Key releases are highlighted in bold

*All release times are GMT

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