USD/JPY – Dollar punches above 113 yen, Japanese inflation report next

USD/JPY has posted gains in the Thursday session, erasing the losses from Wednesday. In North American trade, the pair is trading at 113.39, up 0.58% on the day. In the U.S, Final GDP in Q2 matched the estimate, with a gain of 4.2%. Core durable goods orders jumped 4.5%, crushing the estimate of 1.9%. However, durable goods orders came in at 0.1%, missing the forecast of 0.4%. Unemployment claims climbed to 214 thousand, above the estimate of 208 thousand. Japan will release key consumer numbers. Tokyo Core CPI is expected to post a second straight gain of 0.9%, while retail sales is forecast at 2.2%. As well, the BoJ publishes its summary of opinions. On Friday, the U.S will publish Personal Spending and UoM Consumer Sentiment.

There were no surprises from the Federal Reserve, which hiked rates for the third time this year, raising the benchmark rate by a quarter-point, to a range of 2 percent to 2.25 percent. The Fed intends to continue gradually raising rates, with another rate hike expected in December and three hikes in 2019. What was of more interest to investors was the rate statement, in which the Fed removed the word ‘accommodative’ in the statement, which means that the Fed now considers monetary policy to be neutral. Fed Chair Jerome Powell, in a bid to keep markets calm, stated in a follow-up press conference that removing accommodative language in the statement did not reflect a change in policy. Still, the markets were upbeat after the Fed meeting and the U.S dollar has responded with gains against the Japanese yen on Thursday.

The escalating trade war between U.S and its major trading partners has left the automobile sector particularly vulnerable, as that industry is highly dependent on open, tariff-free borders. On Wednesday, Japan and the U.S agreed to start trade talks, which will keep Japan’s auto sector protected from U.S tariffs, at least for the time being. President Trump has vowed to redress the $69 billion trade surplus that Japan has with the U.S., although Japan has balked at signing a free trade deal with the U.S, as it prefers a multilateral trade agreement.

Euro tumbles on talk Italy to delay budget meeting

Gold rises after limited impact from Fed hike

USD/JPY Fundamentals

Thursday (September 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.4%. Actual 0.1%
• 8:30 US Final GDP. Estimate 4.2%. Actual 4.2%
• 8:30 US Durable Goods Orders. Estimate 1.9%. Actual 4.5%
• 8:30 US Final GDP Price Index. Estimate 3.0%. Actual 3.0%
• 8:30 US Goods Trade Balance. Estimate -70.6B. Actual -75.8B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%. Actual 0.8%
• 8:30 US Unemployment Claims. Estimate 208K. Actual 214K
• 10:00 US Pending Home Sales. Estimate -0.2%
• 10:30 US Natural Gas Storage. Estimate 64B
• 16:30 US Fed Chair Powell Speaks
• 19:30 Tokyo Core CPI. Estimate 0.9%
• 19:50 BoJ Summary of Opinions
• 19:50 BoJ Retail Sales. Estimate 2.2%

Friday (September 28)

• 8:30 US Personal Spending. Estimate 0.3%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 100.5

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, September 27, 2018

USD/JPY September 27 at 11:50 DST

Open: 112.73 High: 113.07 Low: 112.56 Close: 113.39

USD/JPY Technical

USD/JPY was mostly flat in a quiet Asian session. The pair posted slight gains in European trade and this trend has continued in North American trade

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

Further levels in both directions:

• Below: 112.30, 111.22, 110.21 and 109.21
• Above: 113.75, 114.73 and 115.51
• Current range: 112.30 to 113.75

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