USD/JPY – dollar shrugs off soft Final GDP

The Japanese yen has ticked higher in the Thursday session. In North American trade, USD/JPY is trading at 110.37, up 0.10% on the day. On the release front, Japanese retail sales dropped to 0.6%, its lowest gain since October. Later in the day, Japan releases Tokyo Core CPI, which is expected to edge up to 0.6 percent. In the U.S, Final GDP in Q1 slipped to 2.0%, missing the estimate of 2.2%. Unemployment claims jumped to 227 thousand, well above the estimate of 220 thousand. On Friday, Japan releases consumer confidence. The U.S will publish consumer spending and inflation reports, as well as UoM Consumer Sentiment.

U.S numbers were soft for a second straight day on Thursday, but the dollar has managed to hold its own against the yen. Final GDP dipped to 2.0%, weaker than the second estimate of GDP in May, which showed growth of 2.0%. Much of the slowdown is being attributed to weaker consumer spending in the first quarter. There are expectations of banner growth in the second quarter, with some analysts predicting growth of over 5 percent, as the massive January tax cut should boost economic growth. However, the escalating trade war between the U.S and its trading partners, especially China, could dampen second quarter GDP. Trade tensions show no sign of easing, with President Trump threatening tariffs on some $250 billion in Chinese goods. On Wednesday, U.S durable goods reports in May were a disappointment. Core durable goods orders declined 0.3%, well of the estimate of 0.5% and a 4-month low. Durable goods orders declined for a second straight month, with a reading of -0.6%. Still, this was better than the forecast of -0.9%. 

As the second quarter draws to a close, the U.S economy continues to perform well. Economic growth has been strong and the labor market is close to capacity. However, the trade war between the U.S and its major partners could be the dark cloud on the horizon. The Federal Reserve now plans to raise rates four times in 2018 (up from three), but a global trade war could force the Fed to revise its forecast back to three hikes. On Tuesday, Atlanta Fed bank president Raphael Bostic said that if the trade war intensified, he would vote against a fourth rate hike, due to downside risks to the economy. Fed Chair Jerome Powell sounded pessimistic about the economic effects of trade tensions at an ECB forum earlier in June, and if other Fed members express concerns, a fourth rate hike could be delayed until 2019.

  Confusion reigns supreme

  Markets remain under pressure on trade concerns

  Dollar rises to new heights against G10 and EM pairs

USD/JPY Fundamentals

Wednesday (June 27)

• 19:50 Japanese Retail Sales. Estimate 1.3%. Actual 0.6%

Thursday (June 28)

• 8:30 US Final GDP. Estimate 2.2%. Estimate 2.0%
• 8:30 US Unemployment Claims. Estimate 220K. Actual 227K
• 8:30 US Final GDP Price Index. Estimate 1.9%. Actual 2.2%
• 10:30 US Natural Gas Storage. Estimate 73B. Actual 66B
• 12:00 US FOMC Member Bostic Speaks
• 19:30 Japanese Tokyo Core CPI. Estimate 0.6%
• 19:30 Japanese Unemployment Rate. Estimate 2.5%
• 19:50 Japanese Preliminary Industrial Production. Estimate -1.1%

Friday (June 29)

• 1:00 Japanese Consumer Confidence. Estimate 43.9
• 1:00 Japanese Housing Starts. Estimate -5.9%
• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Core Personal Spending. Estimate 0.4%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 99.1

*All release times are DST

*Key events are in bold

USD/JPY for Thursday, June 28, 2018

USD/JPY June 28 at 11:05 DST

Open: 110.26 High: 110.42 Low: 109.97 Close: 110.33

USD/JPY Technical

In Asian trade, USD/JPY ticked lower but then recovered in the Asian session. The pair has posted slight losses in the European session but has recovered in North American trade

• 110.21 was tested earlier in support and is a weak line
• 111.22 is the next resistance line

Further levels in both directions:

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

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