USD/JPY – Japanese yen dips despite soft US durables, Japan retail sales ahead

The Japanese yen has posted losses in the Wednesday session, continuing the trend seen on Tuesday. In the North American trade, USD/JPY is trading at 110.43 up 0.36% on the day. On the release front, U.S durable goods pointed to contraction. There was more bad news from the housing front, as Pending Home Sales came in at -0.5%, marking a second straight decline. This missed the estimate of a 0.4% gain. Later in the day, Japan releases Retail Sales, which is expected to drop to 1.3%. On Thursday, the U.S will publish Final GDP for the first quarter and unemployment claims.

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%. Despite the soft May numbers, the data for April was revised upwards, so business spending on equipment is expected to show moderate growth in the second quarter. However, the escalating trade war between the U.S and its trading partners could dampen business spending and send the U.S dollar downwards.

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.

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USD/JPY Fundamentals

Wednesday (June 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual -0.3%
• 8:30 US Durable Goods Orders. Estimate -0.9%. Actual -0.6%
• 8:30 US Goods Trade Balance. Estimate -68.9B. Actual -64.8B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%. Actual 0.5%
• 10:00 US Pending Home Sales. Estimate 0.4%. Actual -0.5%
• 10:30 US Crude Oil Inventories. Estimate -2.4M
• 11:00 US FOMC Member Quarles Speaks
• 19:50 Japanese Retail Sales. Estimate 1.3%

Thursday (June 28)

• 8:30 US Final GDP. Estimate 2.2%
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are DST

*Key events are in bold

USD/JPY for Wednesday, June 27, 2018

USD/JPY June 27 at 10:50 DST

Open: 110.04 High: 110.45 Low: 109.69 Close: 110.43

USD/JPY Technical

USD/JPY showed little movement in the Asian session. The pair has posted small gains in the European and North American sessions

• 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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