USD/JPY – Strong dollar pushes yen close to 114

The Japanese yen has ticked lower in the Wednesday session. In North American trade, USD/JPY is trading at 113.91, up 0.11% on the day. On the release front, U.S. Preliminary GDP for the third quarter gained 3.5%, just shy of the estimate of 3.6%. This follows an identical gain of 3.5% in the Advanced GDP release. Japan will release retail sales, with an estimate of 2.7%. Thursday promises to be a busy day, as the U.S. releases three key indicators – Core PCE Price Index, personal spending and unemployment claims. As well, the FOMC releases the minutes of its November policy meeting. Japan will publish Preliminary Industrial Production.

The Bank of Japan is committed to its target of just below 2 percent, but that goal remains elusive. BoJ Core CPI, the preferred inflation indicator of the bank, edged up to 1.3%, its highest level in 2018 (the indicator posted an identical gain in August). Inflation could face further headwinds, as the slowdown in China and the ongoing global trade war takes a bite out of the country’s export sector. As well, the recent drop in oil prices is also likely to hamper inflation. There is little reason to expect that inflation will gather any upward momentum and some analysts are forecasting that inflation in 2018 will fall below the 1 percent level. Weak inflation means that the BoJ has little incentive to alter its ultra-accommodative monetary policy.

All eyes are on the G-20 summit in Argentina, which begins on Friday. Analysts aren’t particularly interested in the agenda of the summit, which is likely to be overshadowed by a meeting on the sidelines between President Trump and Chinese President Xi Jimping. The stakes are high, as the tariff spat between the two economic giants threatens to dampen global growth. Will we see a thaw in the tariff spat, or will Trump and Xi take shots at each other’s policies? Trump has threatened to raise tariffs on Chinese products from 10 percent to 25 percent, but this could be grandstanding ahead of the summit. Trump has always preached ‘the art of the deal’, and the markets are hoping that cooler heads will prevail and the U.S. and China can reach some kind of agreement.

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USD/JPY Fundamentals

Wednesday (November 28)

• 8:30 US Preliminary GDP. Estimate 3.6%. Actual 3.5%
• 8:30 US Goods Trade Balance. Estimate -76.7B. Actual -77.2B
• 8:30 US Preliminary GDP Price Index. Estimate 1.7%. Actual 1.7%
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.5%. Actual 0.7%
• 10:00 US New Home Sales. Estimate 583K. Actual 544K
• 10:00 US Richmond Manufacturing Index. Estimate 16. Actual 14
• 10:30 US Crude Oil Inventories. Estimate 0.6M
• 12:00 US Fed Chair Powell Speaks
• 18:50 Japanese Retail Sales. Estimate 2.7%

Thursday (November 29)

• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.4%
• 8:30 US Unemployment Claims. Estimate 221K
• 10:00 US Pending Home Sales. Estimate 0.8%
• 14:00 US FOMC Meeting Minutes
• 18:30 Tokyo Core CPI. Estimate 1.1%
• 18:30 Japanese Unemployment Rate. Estimate 2.3%
• 18:50 Japanese Preliminary Industrial Production. Estimate 1.3%

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, November 28, 2018

USD/JPY November 28 at 10:40 EST

Open: 113.78 High: 113.96 Low: 113.71 Close: 113.91

USD/JPY Technical

USD/JPY was mostly flat in the Asian and European sessions. The pair has ticked higher in North American trade

• 113.75 is a weak support line
• 114.73 is the next resistance line
• Current range: 113.75 to 114.73

Further levels in both directions:

• Below: 113.75, 112.30, 111.20 and 110.28
• Above: 114.73, 115.50 and 116.55

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.