USD/JPY – Japanese yen pauses from recent gains as current surplus slips

USD/JPY is trading sideways on Tuesday, after posting losses in the past three sessions. In North American trade, the pair is trading at 113.15, down 0.07% on the day. On the release front, Japanese current account surplus dropped to JPY 1.43 trillion, shy of the estimate of JPY 1.52 trillion. Later in the day, Japan releases Core Machinery Orders, which is expected to decline 3.6%. There are no major U.S events on the schedule. On Wednesday, the U.S publishes PPI and the U.S Treasury Currency report, a semi-annual publication.

Investors are keeping a close eye on the U.S Treasury’s currency report, which will be released on Thursday. In the most recent report, the U.S did not name any of its major partners as currency manipulators, but it did criticize China for the “non-market direction” of its economy. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan, in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. The report should be treated as a market-mover.

Investor risk appetite was further dampened on Tuesday, after the IMF released a report in which it lowered its global growth forecasts. The IMF revised growth downwards to 3.7% for 2018 and 2019, down from 3.9% in April. The IMF took note of the trade war between the U.S and its major trading partners, adding that the downward revisions were most notable in emerging countries such as Turkey and Brazil. However, Japan received a better report card from the IMF, which revised upwards its growth forecast for Japan to 1.1%, compared to 1.0% in April.

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USD/JPY Fundamentals

Monday (October 8)

• 19:50 Japanese Current Account. Estimate 1.52T. Actual 1.43T

Tuesday (October 9)

• 1:00 Japanese Economy Watchers Sentiment. Estimate 47.3. Actual 48.6
• 5:40 US NFIB Small Business Index. Estimate 108.9. Actual 107.9
• Tentative – US IBD/TIPP Economic Optimism. Estimate 54.6
• 19:50 Japanese Core Machinery Orders. Estimate -3.6%
• 21:10 US FOMC Member John Williams Speaks

Wednesday (October 10)

• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• Tentative – US Treasury Currency Report

*All release times are DST

*Key events are in bold

USD/JPY for Tuesday, October 9, 2018

USD/JPY October 9 at 11:00 DST

Open: 113.23 High: 113.39 Low: 112.93 Close: 113.15

USD/JPY Technical

USD/JPY ticked lower in the Asian session and recovered in European trade. The pair is showing limited movement 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 and 110.28
• Above: 113.75, 114.73, 115.51 and 116.87
• Current range: 112.30 to 113.75

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