USD/JPY – Yen Ticks Lower as Japanese Inflation Report Meets Expectations

USD/JPY has inched higher in Thursday trade. In the North American session, USD/JPY is trading at 113.64, down 0.09% on the day. On the release front, Japanese Services Producer Price Index gained 0.9%, above the forecast of 0.8%. In the US, unemployment claims climbed to 233 thousand, just below the forecast of 235 thousand. Later in the day, Japan releases Tokyo Core CPI, which is expected to remain unchanged at 0.5 percent. On Friday, the US releases two key indicators – Advance GDP and the UoM Consumer Sentiment.

The Bank of Japan is expected to hold course with its ultra-accommodative monetary policy, following Prime Minister Shinzo Abe’s convincing election victory this week. The BoJ holds a policy meeting next week, and policymakers are expected to maintain its inflation forecasts. At the September meeting, the BoJ stated that it did not expect inflation to reach the Bank’s 2 percent target until fiscal year 2020. BoJ Governor Haruhiko Kuroda has long insisted that the bank will not taper its stimulus program until inflation moves higher. Despite weak inflation and wage growth, there has not been much pressure on the Bank to change policy, as the Japanese economy has performed well in 2017. GDP expanded at an annualized 2.5 percent in the second quarter, buoyed by solid numbers from the manufacturing and export sectors.

The US releases Advance GDP on Friday, and this key indicator should be treated as a market mover. The markets are forecasting a gain of 2.5%,  after Preliminary GDP posted a sharp gain of 3.0%. US economic numbers remain strong, and the labor market is close to capacity. At the same time, inflation has not moved higher, and wage growth has been weaker than expected. Despite the lack of inflation, the odds of a December rate hike have soared in recent weeks, with the odds of a rate raise at 96%, according to CME FedWatch.

USD/JPY Fundamentals

Wednesday (October 25)

• 19:50 Japanese SPPI. Estimate 0.8%. Actual 0.9%

Thursday (October 26)

• 8:30 US Unemployment Claims. 235K. Actual 233K
• 8:30 US Goods Trade Balance. Estimate -63.8B. Actual -64.1B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%. Actual 0.3%
• 10:00 US Pending Home Sales. Estimate 0.2%
• 10:30 US Natural Gas Storage. Estimate 61B. 
• 19:30 Japanese National Core CPI. Estimate 0.7%
• 19:30 Japanese Tokyo Core CPI. Estimate 0.5%

Friday (October 27)

• 8:30 US Advance GDP. Estimate 2.5%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 100.7

*All release times are GMT

*Key events are in bold

USD/JPY for Thursday, October 26, 2017

USD/JPY October 26 at 9:15 EDT

Open: 113.74 High: 113.88 Low: 113.34 Close: 113.64

USD/JPY Technical

USD/JPY posted small losses in the Asian session but recovered in European trade. The pair is showing little movement in the North American session

• 113.55 was tested earlier in support and remains a weak line
• 114.49 is the next resistance line

Current range: 113.55 to 114.49

Further levels in both directions:

• Below: 113.55, 112.57, 110.94 and 110.10
• Above: 114.49, 115.50 and 116.54

OANDA’s Open Positions Ratios

USD/JPY ratio is showing movement towards long positions. Currently, short positions have a slim majority (52%), indicative of slight trader bias towards USD/JPY breaking out and losing 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.