USD/JPY – Yen Strengthens as US Consumer Confidence Slides

USD/JPY has posted modest losses on Tuesday, as the pair trades at 122.50 in the North American session. In economic news,  US Preliminary GDP posted a gain of 2.1%, while CB Consumer Confidence dropped sharply to 90.4 points. Later on Tuesday, the Bank of Japan will release the minutes of its most recent policy meeting. On Wednesday, there are two key major events – Core Durable Goods Orders and Unemployment Claims.

There were no surprises from US Preliminary GDP in the third quarter. The revised GDP report came in at 2.1%, very close to the Advanced GDP reading of 2.0%. Although these numbers pale in comparison to the blistering 3.7% we saw in Q2, they nonetheless point to respectable growth by the US economy in a difficult global environment. Meanwhile, Consumer Confidence slipped badly, dropping to 90.4 points, compared to 97.6 points a month earlier. This was well off the estimate of 99.3 points, and marked the indicator’s weakest showing in 12 months. After this disappointing consumer confidence reading, the markets will be keeping a close eye on Wednesday’s consumer spending indicators, with the release of October’s durable goods reports.

Last week’s Fed minutes did not confirm a December rate hike, but most analysts feel that the long-awaited move will indeed occur next month. Market expectations have risen to 66% that the Fed will make a move next month, and recent comments by Fed policymakers have hinted that a rate move is a strong possibility. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. At the past two policy meetings, the vote against a rate hike was 9-1, but that clearly will not be the outcome at the December meeting. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves would not cause unwanted turbulence on the global markets. One remaining question mark in the rate move puzzle is that of inflation levels. Recent inflation readings have been weak, and the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. The markets will get a look at key inflation indicators shortly before the critical Fed policy meeting on December 16.

USD/JPY Fundamentals

Tuesday (Nov. 24)

• 1:35 Japanese Flash Manufacturing PMI. Estimate 52.1 points. Actual 52.8 points.
• 13:30 US Preliminary GDP. Estimate 2.0%. Actual 2.1%
•  13:30 US Goods Trade Balance. Estimate -61.8B. Actual -58.4B
•  13:30 US Preliminary GDP Price Index. Estimate 1.2%. Actual 1.3%
• 14:00 US S&P/CS Composite-20 HPI. Estimate 5.2%. Actual 5.5%
• 15:00 US CB Consumer Confidence. Estimate 99.3 points. Actual 90.4 points
• 15:00 US Richmond Manufacturing Index. Estimate 0 points. Actual -3 points
• 23:50 BOJ Monetary Policy Meeting Minutes
• 23:50 Japanese SPPI. Estimate 0.6%

Upcoming Key Events

Wednesday (Nov. 25)

• 13:30 US Core Durable Goods Orders. Estimate 0.5%
• 13:30 US Unemployment Claims. Estimate 273K

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY for Tuesday, November 24, 2015

USD/JPY November 24 at 18:40 GMT

USD/JPY 122.48 H: 122.96 L: 122.41

USD/JPY Technical

• 123.74 has some breathing room as the pair trades at lower levels.
• 122.40 is providing weak support.
• Current range: 122.40 to 123.74

Further levels in both directions:

• Below: 122.40, 121.50, 120.40 and 118.53
• Above: 123.74, 125.63 and 126.84

OANDA’s Open Positions Ratio

In the USD/JPY ratio, long positions retain a majority of positions (56:44), which is indicative of trader bias towards the pair moving 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.