USD/JPY – Dollar Under Pressure Ahead of Japanese Household Spending

USD/JPY is unchanged on Monday, although the yen briefly showed some improvement before retracting. Currently, USD/JPY is trading at 112.50. On the release front, there are no US events on the schedule. Japan will release household spending and retail sales. On Tuesday, the US will release Preliminary GDP for the third quarter, with the markets expecting a sharp gain of 3.0%. As well, we’ll get a look at CB Consumer Confidence, which is expected to improve to 101.3 points.

The struggling yen received no help from inflation indicators on Friday, as 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.

The US economy continues to improve and consumer confidence has been an important factor, as higher confidence levels usually translate into increased consumer spending. Last week, UoM Consumer Sentiment jumped to 93.8 points, beating the forecast of 91.6 points. This reading was the indicator’s highest level since May. CB Consumer Confidence follows on Tuesday and is expected to follow suit with a higher reading for November.

The Federal Reserve appears poised to raise interest rates by 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%
• 18:30 Japanese Unemployment Rate. Estimate 3.0%
• 18:50 Japanese Retail Sales. Estimate -1.5%

Tuesday (November 29)

• 8:30 US Preliminary GDP. Estimate 3.0%
• 10:00 US CB Consumer Confidence. Estimate 101.3 points

*All release times are EST

*Key events are in bold

USD/JPY for Monday, November 28, 2016

USD/JPY November 28 at 8:00 EST

Open: 112.65 High: 112.80 Low: 111.35 Close: 112.62

USD/JPY Technical

• USD/JPY dropped sharply in the Asian session but has recovered 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 Monday session. Currently, short positions have a majority (56%), indicative of trader bias towards USD/JPY breaking out 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.