USD/JPY – Yen Shrugs off Weak Japanese Mfg., Housing Reports

USD/JPY is almost unchanged in the Thursday session. In North American trade, the pair is trading at 110.11, down 0.12% on the day. On the release front, Japanese Preliminary Industrial Production declined 0.8%, missing the estimate of -0.2%. In the US, unemployment claims edged up to 236 thousand, just below the forecast of 237 thousand. Later in the day, Japan releases Capital Spending and Final Manufacturing PMI.  On Friday, the US releases key employment data. Average Hourly Earnings is expected to edge lower to 0.2%, and the markets are braced for Nonfarm Employment Change to drop to 180 thousand.

The US economy performed better than expected in the second quarter, as Preliminary GDP (second estimate) for the second quarter was revised to 3.0%. This figure was a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to second quarter growth, which posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, which continues to hover at low levels. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong indication that the economic momentum has continued into the third quarter.

The Japanese yen has had a busy week, as the safe-haven asset as been affected by tensions between the US and North Korea. The yen rose early in the week, after North Korea fired a missile over Japanese territory on Tuesday, drawing sharp condemnations from Japan and the US. However, investors quickly put the crisis behind them, as the dollar recovered and the yen has posted losing sessions for two straight days. The yen remains above the symbolic 110 level, and if North Korea continues to ratchet up tensions and fires a missile at Japan, or at Guam (as it has threatened to do), it’s a safe bet that the yen will rebound and gain ground against the dollar.

Appetite for U.S Dollar Surges, EUR Pounded

USD/JPY Fundamentals

Wednesday (August 30)

• 19:50 Japanese Preliminary Industrial Production. Estimate -0.4%. Actual -0.8%

Thursday (August 31)

• 1:00 Japanese Housing Starts. Estimate -0.2%. Actual -2.3%
• 7:30 US Challenger Job Cuts. Actual 5.1%
• 8:30 US Unemployment Claims. Estimate 237K. Actual 236K
• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.4%. Actual 0.3%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.4%
• 9:45 US Chicago PMI. Estimate 58.7. Actual 58.9
• 10:00 US Pending Home Sales. Estimate +0.4%. Actual -0.8%
• 10:30 US Natural Gas Storage. Estimate 33B. Actual 30B
• 19:50 Japanese Capital Spending. Estimate 8.0%
• 20:30 Japanese Final Manufacturing PMI. Estimate 52.8

Upcoming Key Events

Friday (September 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 4.3%
• 10:00 US ISM Manufacturing PMI. Estimate 56.5
• 10:00 US Revised UoM Consumer Sentiment. Estimate 97.4

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, August 31, 2017

USD/JPY August 31 at 10:55 EDT

Open: 110.25 High: 110.67 Low: 110.09 Close: 110.11

USD/JPY Technical

USD/JPY edged higher in the Asian and European sessions. The pair has reversed directions and posted slight losses in North American trade

• 110.10 was tested earlier in support and remains a weak line. It could see further action in the North American session
• 110.94 is the next resistance line

Current range: 110.10 to 110.94

Further levels in both directions:

• Below: 110.10, 108.69, 107.49 and 106.28
• Above: 110.94, 112.57 and 113.55

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Thursday session. Currently, long positions have a majority (67%), indicative of trader bias towards USD/JPY 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.