USD/JPY – Yen Shrugs off Weak Japanese Retail Sales, Inflation Reports Ahead

USD/JPY gained ground briefly earlier in the Thursday session, but has since retracted. In the North American session, the pair is trading at 112.40. On the release front, Japanese Retail Sales rose 2.0%, well short of the estimate of 2.6%. Later in the day, Japan releases Household Spending and Tokyo Core CPI. On Friday, the US releases UoM Consumer Sentiment.

Japanese retail sales slowed to just 2.0% in May, compared to 3.2% a month earlier. The weak figure points to a Japanese consumer who is hesitant to open the purse strings. Wages have been stagnant, which has hampered consumer spending, a key driver of economic growth. Inflation is stuck below 1 percent, well below the BoJ’s target of 2 percent. Japan will release key consumer data later on Thursday, but the markets are not holding their breath for positive readings. Household Spending is expected to decline 0.7%, while Tokyo Core CPI, the primary gauge of consumer spending, is forecast to post a weak gain of 0.2%. At the same time, Japanese policymakers can point to five straight quarters of expansion, as the stronger global demand has boosted Japan’s manufacturing and export sectors.

If recent communications from the BoJ are any indication, the bank isn’t likely to tighten monetary policy anytime soon. The bank has been very consistent in its message that the ultra-loose accommodative policy will stay in place until inflation levels rise closer to the BoJ’s target of 2.0%. Despite years of stimulus from the BoJ, the inflation target remains elusive. However, rather than lower the target, the rigid bank has insisted that it’s only a matter of time before the improved Japanese economy triggers higher inflation. At the same time, the bank is mindful that there is growing speculation that better economic conditions could translate into the bank winding up its stimulus package. In the bank’s Summary of Opinion, released earlier this week, board members acknowledged that it was important for the BoJ to clearly communicate to the markets that the bank has no plans withdraw monetary stimulus anytime soon. There may be some tweaks and nuances along the way, but that will likely be the extent of any moves from the BoJ, barring unexpected changes in inflation levels.

USD/JPY Fundamentals

Wednesday (June 28)

• 19:50 Japanese Retail Sales. Estimate 2.6%. Actual 2.0%

Thursday (June 29)

• 8:30 US Final GDP. Estimate 1.2%. Actual 1.4%
• 8:30 US Unemployment Claims. Estimate 241K. Actual 144K
• 8:30 US Final GDP Price Index. Estimate 2.2%. Actual 1.9%
• 10:30 US Natural Gas Storage. Estimate 50B. Actual 46B
• 19:30 Japanese Household Spending. Estimate -0.7%
• 19:30 Japanese Tokyo Core CPI. Estimate 0.2%

Friday (June 30)

• 10:00 US Revised UoM Consumer Sentiment. Estimate 94.5

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, June 29, 2017

USD/JPY June 29 at 12:00 EDT

Open: 112.35 High: 112.42 Low: 111.83 Close: 112.21

USD/JPY Technical

USD/JPY showed little movement in the Asian session. The pair posted gains in European trade but has given up these gains in the North American session

• 110.94 is providing support
• 112.57 is a weak resistance line
• Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 109.77, 108.13 and 106.68
•  Above: 112.57, 113.55 and 114.37

OANDA’s Open Positions Ratio

USD/JPY ratio is showing little movement this week. Currently, long positions have a majority (59%), indicative of trader bias towards USD/JPY moving to higher levels.

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.