USD/JPY – Dollar Jumps to 113 Yen on Soft Consumer Spending

USD/JPY has posted strong gains on Tuesday, erasing the gains which marked the Monday session. Currently, USD/JPY is trading just below the 113 line. On the release front, Japanese Household Spending and Retail Sales posted declines, although both indicators beat expectations. The US will publish Preliminary GDP for the third quarter, with the estimate standing at 3.0%. As well, we’ll get a look at CB Consumer Confidence, which is expected to improve to 101.3 points.

The Japanese consumer remains in a surly mood, as consumer spending indicators continue to decline. Household Spending declined 0.4%, while Retail Sales dipped 0.1%. Although these readings were better than the forecasts, the yen responded with losses of 1.1%. Meanwhile, the economy continues to grapple with deflation. Tokyo Core CPI, the primary gauge of consumer inflation, which came in at -0.4% in the November report, has failed to post a gain in 2016. The BoJ has failed to kick-start inflation or boost growth, despite radical easing measures such as negative interest rates. Japanese policymakers have indicated that the government may resort to fiscal stimulus in order to increase economic growth, given the inability of the BoJ to improve the economy.

It’s a virtual certainty that the Fed will raise interest rates a quarter-point in December, with the odds of a rate hike at 93 percent. The Fed minutes were released on Thursday, indicating that policymakers felt it appropriate to raise rates “relatively soon”. Earlier this month, Fed Chair Janet Yellen used the same phrase in her testimony before a congressional committee. The minutes indicated that some members argued that the Fed needs to raise rates in December in order to preserve the bank’s credibility – despite some broad hints of rate hikes during 2016, the Fed has stayed on the sidelines throughout 2016, causing significant disappointment and frustration in the markets.

USD/JPY Fundamentals

Monday (November 28)

• 18:30 Japanese Household Spending. Estimate -1.0% Actual -0.4%
• 18:30 Japanese Unemployment Rate. Estimate 3.0%. Actual 3.0%
• 18:50 Japanese Retail Sales. Estimate -1.5%. Actual -0.1%.

Tuesday (November 29)

• 8:30 US Preliminary GDP. Estimate 3.0%
• 8:30 US Preliminary GDP Price Index. Estimate 1.5%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.3%
• 9:15 US FOMC Member William Dudley Speech
• 10:00 US CB Consumer Confidence. Estimate 101.3 points
• 12:40 US FOMC Member Jerome Powell Speech
• 18:50 Japanese Preliminary Industrial Production. Estimate 0.2%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, November 29, 2016

USD/JPY November 29 at 8:00 EST

Open: 111.66 High: 113.14 Low: 111.66 Close: 112.92

USD/JPY Technical

• USD/JPY was flat in the Asian session and has posted gains in the European session.
• 112.48 is providing support
• 113.86 is a strong resistance line
• Current range: 112.48 to 113.86

Further levels in both directions:

• Below: 112.48, 111.45, 110.68 and 109.47
•  Above: 113.86, 114.13 and 115.45

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Tuesday session. Currently, short positions have a majority (56%), indicative of trader bias towards USD/JPY reversing directions and moving lower.

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.