USD/JPY – Yen Dips as US GDP Accelerates in Q3

The Japanese yen has posted considerable gains in the Wednesday session. In North American trade, USD/JPY is trading at 111.84, up 0.34% on the day. On the release front, Japanese Retail Sales disappointed with a decline of 0.2%. This missed the estimate of a 0.1% gain. Later in the day, Japan releases Preliminary Industrial Production, with an estimate of 1.9%. In the US, Preliminary GDP for the third quarter came in at 3.3%, matching the forecast. Pending Home Sales jumped to 3.5%, crushing the estimate of 1.1%. As well, Fed Chair Janet Yellen will testify before a congressional committee. On Thursday, the US releases Personal Spending and unemployment claims, and Japan publishes Tokyo Core CPI.

Fed Chair Designate Jerome Powell testified before the Senate Banking Committee on Tuesday. Powell said that he favored tailoring regulations for small banks, leaving the toughest regulations for the big players. Powell was cautious and diplomatic during the hearing, saying that the case is building for a December rate hike, and refused to express an opinion on the Trump tax bill. He will replace Janet Yellen in February, and is widely expected to continue Yellen’s monetary stance of small, gradual rate hikes. Fed policymakers have differing views on what to do about inflation, which remains at low levels. Some members have proposed that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

Is the Bank of Japan rethinking its massive stimulus program? With the Japanese economy showing moderate growth, there has been speculation that the Bank of Japan is giving some thought to tapering stimulus. Any tapering to the program could give a significant boost to the yen, so the markets are closely monitoring BoJ statements and comments from BoJ policymakers, looking for clues. However, a stronger yen would hurt exports, which has been a catalyst for the stronger economy. Inflation and wage growth remain low, and if we are to take BoJ Governor Haruhiko Kuroda at his word, the Bank will not taper stimulus before inflation moves closer to the BoJ’s target of around 2 percent.

USD/JPY Fundamentals

Tuesday (November 28)

• 18:50 Japanese Retail Sales. Estimate +0.1%. Actual -0.2%

Wednesday (November 29)

• 8:30 US Preliminary GDP. Estimate 3.3%. Actual 3.3%
• 8:30 US FOMC Member Charles Dudley Speaks
• 8:30 US Preliminary GDP Price Index. Estimate 2.2%. Actual 2.1%
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:00 US Pending Home Sales. Estimate 1.1%. Actual 3.5%
• 10:30 US Crude Oil Inventories. Estimate -2.5M. Actual -3.4M
• 14:00 US Beige Book
• All Day – OPEC Meetings
• 18:50 Japanese Preliminary Industrial Production. Estimate 1.9%

Thursday (November 30)

• 8:30 US Unemployment Claims. Estimate 241K
• 8:30 US Personal Spending. Estimate 0.2%
• 18:30 Japanese Household Spending. Estimate -0.2%
• 18:30 Japanese Tokyo Core CPI. Estimate 0.6%

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, November 29, 2017

USD/JPY November 29 at 10:45 EDT

Open: 111.46 High: 112.15 Low: 111.37 Close: 111.87

USD/JPY Technical

USD/JPY was flat in the Asian session and ticked higher in the European session. The pair has posted further gains in North American trade

• 111.53 is a weak support line
• 112.57 is the next resistance line

Current range: 111.53 to 112.57

Further levels in both directions:

• Below: 111.53, 110.10, 109.12 and 108.25
• Above: 112.57, 113.55 and 114.59

OANDA’s Open Positions Ratios

In the Wednesday session, USD/JPY ratio is showing long positions with a majority (56%). This is indicative of trader bias towards USD/JPY continuing to move higher.

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.