USD/JPY Steady at 113, Markets Await US GDP Report

The Japanese yen continues to have a quiet week, as USD/JPY trades at the 113 line in Friday’s European session. On the release front, BOJ Core CPI posted a gain of 1.1%, shy of the estimate of 1.2%. It’s busy day in the US, highlighted by two key events – Preliminary GDP and UoM Consumer Sentiment. With the GDP estimate standing at just 0.4%, we could see some strong movement in the currency markets in the North American session.

Japanese inflation levels remain low, and the crash in oil prices has only exacerbated the situation. Tokyo Core CPI dipped by 0.1% for a second straight month, raising concerns about a return to deflation, which would be a nightmarish scenario for policymakers. National Core CPI wasn’t much better, with a flat reading of 0.0%. BOJ Core CPI posted a gain of 1.1%, but this was lower than the previous reading of 1.3%. The BoJ’s target of 2.0% inflation appears to be an unrealistic goal, given current economic conditions, and the BOJ is under pressure to implement additional easing in order to kick-start the lethargic economy. If the BoJ does take action at its policy meeting next month, the high-flying yen could reverse directions and head lower.

The US manufacturing sector has been an Achilles heel for the US economy, but there was positive news on Thursday, as durable goods reports posted excellent gains in January. Core Durable Goods rose 1.8%, crushing the estimate of 0.2%. This marked the key indicator’s strongest showing since March 2014. Durable Goods Orders followed suit with a sharp rise of 4.9%, rebounding from the previous reading of -5.1%. This was stronger than the estimate of 3.0%. These excellent figures point to stronger domestic consumption, at a time when the US economy is grappling with a downturn in global demand, which has taken its toll on the export and manufacturing sectors. A strong US dollar, which has posted broad gains in recent months, has only exacerbated the situation. The good news was tempered by a weak employment report, as Unemployment Claims rose to 272 thousand, very close to the estimate of 271 thousand.

USD/JPY Fundamentals

Thursday (Feb. 25)

• 18:30 Japanese Tokyo Core CPI. Estimate 0.0%. Actual -0.1%
• 18:30 Japanese National Core CPI. Estimate -0.2%. Actual 0.0%

Friday (Feb. 26)

• 00:00 Japanese BOJ Core CPI. Estimate 1.2%. Actual 1.1%
• 8:30 US Preliminary GDP. Estimate 0.4%
• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Goods Trade Balance. Estimate -61B
• 8:30 US Personal Spending. Estimate 0.3%
• 8:30 US Personal Income. Estimate 0.4%
• 8:30 US Preliminary GDP Price Index. Estimate 0.8%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 91.1 points
• 10:00 US Revised UoM Inflation Expectations
• 10:15 US FOMC Member Jerome Powell Speaks
• 13:30 US FOMC Member Lael Brainard Speaks

Upcoming Key Events

Sunday, Feb. 28

• 18:50 Japanese Retail Sales

*Key releases are highlighted in bold

*All release times are EST

USD/JPY for Friday, February 26, 2016

USD/JPY February 26 at 5:40 EST

Open: 113.14 Low: 112.55 High: 113.22 Close: 113.01

USD/JPY Technical

• There is resistance at 113.86
• 112.48 has switched to a support role following gains by USD/JPY on Thursday
• Current range: 111.50 to 112.48

Further levels in both directions:

• Below: 112.48, 111.50, 109.87 and 108.58
• Above: 113.86, 114.65 and 115.45

OANDA’s Open Positions Ratio

USD/JPY ratio remains unchanged, consistent with the lack of movement which has characterized USD/JPY for most of the week. Long positions retain a strong majority (66%), which is indicative of strong trader bias towards the pair breaking out 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.