USD/JPY – Japanese Yen Gains Ground as Retail Sales Sparkle

After an uneventful week, USD/JPY has lost ground in the Thursday session. In North American trade, the pair is trading at 112.97, down 0.32%. On the release front, Japanese indicators were strong. Preliminary Industrial Production improved to 0.6%, edging above the estimate of 0.5%. Retail Sales, the primary gauge of consumer spending, surged 2.2%, crushing the estimate of 1.1%. In the US, unemployment claims disappointed, remaining unchanged at 245 thousand. This was above the estimate of 240 thousand.

In the US, key indicators were mixed on Wednesday. CB Consumer Confidence slowed to 122.2, well off the estimate of 128.2 points. Pending Home Sales posted a small gain of 0.2%, beating the estimate of -0.4%. Housing numbers continue to beat expectations. Last week, Housing Starts came in at 1.30 million, beating the forecast of 1.25 million. On Tuesday, New Home Sales sparkled, with a gain of 733 thousand. This easily beat the estimate of 654 thousand, and was the highest reading since September 2007.

Japan has seen an impressive rebound in economic growth in 2017, and key consumer indicators, released earlier this week, beat their forecasts. Tokyo Core CPI, the primary gauge of consumer inflation, climbed 0.9%, in December its strongest gain since March 2015. This edged above the forecast of 0.8%. National Core CPI improved to 0.9%, just above the estimate of 0.8%. There was more positive news as Household Spending rebounded with an excellent gain of 1.7%, crushing the estimate of 0.6%. This reading marked a 5-month high.

Bank of Japan Core Inflation, which the BoJ relies on to measure inflation, climbed 0.6%, above the estimate of 0.5%. This marked a 3-month high. Other inflation indicators also beat their estimates, underscoring that inflation is on the move. Still, the BoJ has made it abundantly clear that it will not tighten its ultra-accommodative monetary policy until inflation is close to the Bank’s 2 percent inflation target.  The minutes of the October meeting indicated that most members favored a  continuation of the current ultra-accommodative policy. This could weigh on the yen, as other central banks, such as the ECB, the Federal Reserve and the Bank of Canada have tightened policy in recent months, widening divergence with the Bank of Japan.

USD/JPY Fundamentals

Wednesday (December 27)

• 18:50 BoJ Summary of Opinions
• 18:50 Japanese Preliminary Industrial Production. Estimate 0.5%. Actual 0.6%
• 18:50 Japanese Retail Sales. Estimate 1.1%. Actual 2.2%

Thursday (December 28)

• 00:00 Japanese BoJ Core CPI. Estimate 0.5%. Actual 0.6%
• 8:30 US Unemployment Claims. Estimate 240K. Actual 245K
• 8:30 US Goods Trade Balance. Estimate -67.7B. Actual -69.7B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 0.7%
• 9:45 US Chicago PMI. Estimate 62.2
• 10:30 US Natural Gas Storage. Estimate -115B
• 11:00 US Crude Oil Inventories. Estimate -3.9M

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, December 28, 2017

USD/JPY December 28 at 11:00 EDT

Open: 113.34 High: 113.34 Low: 113.66 Close: 112.97

USD/JPY Technical

USD/JPY posted losses in the Asian session. The pair has shown limited movement in the European and North American sessions

• 112.57 is providing support
• 113.55 is the next resistance line

Current range: 112.57 to 113.55

Further levels in both directions:

• Below: 112.47, 111.53, 110.10 and 109.11
• Above: 113.55, 114.59 and 115.50

OANDA’s Open Positions Ratios

USD/JPY ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (52%), indicative of slight trader bias towards USD/JPY reversing directions and moving to higher ground.

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.