USD/JPY – Yen Slips to 1-Week Low on Strong US GDP

USD/JPY has posted strong gains in the Wednesday session. In the North American session, USD/JPY is trading at 106.18, up 0.81% on the day. On the release front, US Final GDP impressed with a gain of 2.9%, beating the estimate of 2.7%. There was more good news as Pending Home Sales jumped 3.1%, rebounding after the previous release of -4.7%. Later in the day, Japan releases Retail Sales, which is expected to edge up to 1.7%. On Thursday, US unemployment claims is forecast to tick up to 230 thousand, and UoM Consumer Sentiment is predicted to climb to 101.9 points. Japan will publish Tokyo Core CPI and Preliminary Industrial Production.

The tariff dispute between the US and China has shaken up global stock markets and also caused volatility in the currency markets. The safe-haven yen moved higher last week, after President Trump’s dramatic announcement that he was imposing stiff tariffs on up to $60 billion in Chinese imports. China vowed to retaliate and slap imports on a range of US products. This move came on the heels of a blanket US tariff on steel imports. Although Trump backtracked and exempted Canada, Mexico and other countries from the steel tariffs, the threat of a global trading war has unnerved investors. This week, however, China was singing a more conciliatory tune, saying it would apply to the World Trade Organization to overturn the tariffs. The US has imposed the tariffs under a national security provision, but China has argued that the move is a trade barrier with the intent of protecting domestic producers. Although the dispute has not been resolved, the Chinese move has eased tensions and restored investor risk appetite, in the hope that both the US and China will climb down from their trees and reach some agreement instead of imposing tariffs on each other.

Much like the situation in the eurozone, Japan’s economy continues to expand, but underlying inflation remains at low levels. Inflation is currently around 1%, well below the Bank of Japan target of just below 2 percent. The BoJ has been consistent in its message to the markets, saying that it has no plans to tighten its ultra-accommodative monetary policy until inflation moves closer to target. With the rebound in the Japanese economy, there has been speculation that the BoJ could tighten its policy, which could cause some volatility from the yen.

USD/JPY Fundamentals

 Wednesday (March 28)

• 8:30 US Final GDP. Estimate 2.7%. Actual 2.9%
• 8:30 US Final GDP Price Index. Estimate 2.3%. Actual 2.3%
• 8:30 US Goods Trade Balance. Estimate -74.1B. Actual -75.4B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.6%. Actual 1.1%
• 10:00 US Pending Home Sales. Estimate 2.1%. Actual 3.1%
• 10:30 US Crude Oil Inventories
• 12:00 US FOMC Member Raphael Bostic Speaks
• 19:50 Japanese Retail Sales. Estimate 1.7%

 Thursday (March 29)

• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.2%
• 8:30 US Unemployment Claims Estimate 230K
• 9:45 Chicago PMI. Estimate 62.1
• 10:00 US Revised UoM Consumer Sentiment. Estimate 101.9
• 19:30 Japanese Tokyo Core CPI. Estimate 0.9%
• 19:50 Japanese Preliminary Industrial Production. Estimate 5.1%

*All release times are EST

*Key events are in bold

USD/JPY for Wednesday, March 28, 2018

USD/JPY March 28 at 10:30 EST

Open: 105.33 High: 106.34 Low: 105.33 Close: 106.19

USD/JPY Technical

USD/JPY edged higher in the Asian session and continued the upward movement in European trade. USD/JPY is showing little movement in North American trade

• 105.53 is providing support
• 106.64 is the next resistance line

Further levels in both directions:

• Below: 105.53, 104.32, 103.09 and 101.84
• Above: 106.64, 107.29 and 108.00
• Current range: 105.53 to 106.64

OANDA’s Open Positions Ratios

USD/JPY ratio is showing little movement this week. Currently, long positions have a majority (67%), indicative of trader bias towards USD/JPY continuing to head to higher ground.

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.