USD/JPY – Yen Improves As Japanese Inflation Data Shines

The Japanese yen has showed improvement, as the pair trades below the 102 on Wednesday. In economic news, Japanese Corporate Goods Price Index sparkled, posting its sharpest gain in almost five years. On the manufacturing front, Japanese Preliminary Machine Tool Orders posted another strong gain. In the US, Core Retail Sales and Retail Sales both missed expectations on Tuesday. In the US, there was good news on the inflation front, as the Producer Price Index easily beat the estimate.

Japanese inflation numbers have been improving, as they continue to move towards the Bank of Japan’s inflation target of 2%. The Corporate Goods Price Index had an excellent April, jumping 4.1%. This matched expectations and was the index’s best performance since October 2008. We’ll get a look at Japanese Preliminary GDP and Tertiary Industry Activity later on Wednesday. The markets are expecting strong numbers from both indicators.

Low inflation levels has been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. There was good news as PPI, a key inflation indicator, edged higher in April, coming in at 0.6%. This easily beat the estimate of 0.2%. Core PPI also beat the estimate, posting a gain of 0.5%.

The crisis in Ukraine remains in the headlines, as pro-Russian separatists held referendums on Sunday and declared self-rule after the vote.  The Ukraine government denounced the referendums as illegal and European countries have threatened further sanctions against Russia. However, sanctions have been limited so far, as Europe is dependent on Russia for energy supplies. Elections scheduled in Ukraine on May 25th remain in jeopardy and there are mounting fears that the country could slide into civil war, as fighting continues between government and separatist forces. If the tense situation continues to deteriorate, we could see a negative reaction from the markets.

USD/JPY for Wednesday, May 14, 2014

USD/JPY May 14 at 13:25 GMT

USD/JPY 101.91 H: 102.23 L: 102.72

USD/JPY Technical

USD/JPY has lost ground in Wednesday trade. The pair dipped below the 102 in the European session.

• On the upside, 102.53 continues as the first line of resistance. There is stronger resistance at 103.07.
• 101.19 is providing support. The key line of 100.00 follows.
• Current range: 101.19 to 102.53

Further levels in both directions:

• Below: 101.19, 100.00, 99.57 and 98.97.
• Above: 102.53, 103.07, 104.17, 105.70 and 106.85.

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions in Wednesday trading, continuing the trend we saw a day earlier. This is consistent with the pair’s movement, as the yen has gained ground. The ratio is made up of a substantial majority of long positions, indicating trader bias towards the dollar reversing directions and moving upwards.

The pair is trading in the high-101 range on Wednesday. USD/JPY is unchanged early in the North American session.

USD/JPY Fundamentals

• 6:00 Japanese Machine Preliminary Orders. Estimate 48.8%.
• 12:30 US PPI. Estimate 0.2%. Actual 0.6%.
• 12:30 US Core PPI. Estimate 0.2%. Actual 0.5%.
• 14:30 US Crude Oil Inventories. Estimate -0.4M.
• 23:50 Japanese Preliminary GDP. Estimate 1.0%.
• 23:50 Japanese Tertiary Industry Activity. Estimate 2.5%.
• 23:50 Japanese Preliminary GDP Price Index. Estimate -0.1%.

*Key releases are highlighted in bold

*All release times are GMT

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.