USD/JPY – Japanese Yen Steady, BoJ Inflation Falls Short

The Japanese yen has ticked higher in the Tuesday session. In North American trade, USD/JPY is trading at 110.92, down 0.12% on the day. On the release front, Bank of Japan Core CPI dropped to 0.5%, missing the estimate of 0.6%. Later in the day, Japan releases Flash Manufacturing PMI, which is expected to improve to 53.6 points. The sole US release is the Richmond Manufacturing Index, which is forecast to rebound with a gain of 9 points. On Wednesday, the Federal Reserve will release the minutes of its May policy meeting.

Earlier on Tuesday, BoJ Governor Haruhiko Kuroda promised that the bank would be transparent with regard to an exit from its radical easing policy, but added that the markets shouldn’t hold their breath for any dramatic announcements. Kuroda said that the BoJ would “communicate specifics on how we plan to exit once inflation accelerates toward 2 percent, but reiterated that there would be no departure from policy until the inflation target was met. That goal remains elusive, as underscored by BoJ Core CPI, which fell in April for a second straight month. BoJ policymakers have been looking for ways to move away from radical easing, as ultra-low interest rates have hurt the profits of financial institutions.

There was a dramatic development in the China-US tariff battle on the weekend, as US Treasury Secretary Steven Mnuchin said that the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants have traded stiff tit-for-tat tariffs in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can now discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. In addition to the trade deficit, the US wants to discuss technology transfers and cyber theft.

  Commodity currencies are beaming

USD/JPY Fundamentals

Tuesday (May 22)

• 1:00 Japanese BoJ Core CPI. Estimate 0.6%. Actual 0.5%
• 10:00 US Richmond Manufacturing Index. Estimate 9
• 20:30 Japanese Flash Manufacturing PMI. Estimate 53.6

Wednesday (May 23)

• 14:00 US FOMC Meeting Minutes

*All release times are DST

*Key events are in bold

USD/JPY for Tuesday, May 22, 2018

USD/JPY May 22 at 9:15 DST

Open: 111.05 High: 111.19 Low: 110.80 Close: 110.93

USD/JPY Technical

USD/JPY inched lower in the Asian session. The pair has shown limited movement in the European session

• 110.11 is providing support
• 111.22 is a weak resistance line

Further levels in both directions:

• Below: 110.11, 108.89, 108.00 and 107.29
• Above: 111.22, 112.06 and 113.39
• Current range: 110.11 to 111.22

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (57%), indicative of trader bias towards USD/JPY reversing directions and moving upwards.

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.