USD/JPY – Yen Ticks Lower, Tokyo Core CPI Next

The Japanese yen is showing little movement on Thursday, continuing an uneventful week. Currently, USD/JPY is trading at 100.40. On the release front, Japanese SPPI posted a gain of 0.4%, beating the estimate of 0.1%. Japan will release more inflation data during the day, highlighted by Tokyo Core CPI. Over in the US, there are two key releases – durable good reports and unemployment claims. On Friday, the US releases Preliminary GDP and we’ll also hear from Federal Reserve chair Janet Yellen at the Jackson Hole conference.

Japan is in tough in a battle over deflation, but the results have been less than satisfactory. The government’s Abenomics economic plan and BoJ easing has failed to boost inflation levels. The government has now embarked on an ambitious stimulus plan, but even if successful, it will take time for inflation to gain traction. Tokyo Core CPI, the primary important gauge of consumer spending, continues to post declines, and the estimate for the July reading stands at -0.3%. On the manufacturing front, Japanese manufacturers remain pessimistic. In August, Flash Manufacturing PMI improved to 49.6 points, almost identical to the estimate of 49.5 points. However, the indicator has remained under the 50-point level (which separates contraction and expansion) since February, pointing to ongoing contraction in the industry. We’ll get another look at the mood of manufacturers next week, with the release of Final Manufacturing PMI.

The markets will shift their attention to scenic Wyoming, where central bankers and other senior policymakers meet for a 3-day summit at Jackson Hole, starting on Thursday. With investors sticking to the sidelines ahead of the meeting, there has been a notable lack of movement in the currency markets so far this week. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing of a rate hike. Federal policymakers are divided over a rate hike, as the US labor market is red-hot, but inflation levels remains very low. Fed chair Janet Yellen will address the conference on Friday, and she is expected to discuss the labor market and the inflation picture. As well, the US will release Preliminary GDP for the second quarter. In July, a soft Advance GDP sent the dollar downwards, as the economy expanded 1.2%, well short of the forecast of 2.6%. The estimate for the Preliminary GDP report stands at 1.1%.

Wednesday (August 24)

• 19:50 Japanese SPPI. Estimate 0.1%. Actual 0.4%

Thursday (August 25)

• 8:30 US Unemployment Claims. Estimate 265K
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Durable Goods Orders. Estimate 3.4%
• 8:45 US Flash Services PMI. Estimate 51.9
• 10:30 US Natural Gas Storage. Estimate 22B
• All Day – Jackson Hole Symposium
• 19:30 Tokyo Core CPI. Estimate -0.3%
• 19:30 National Core CPI. Estimate -0.4%

Friday (August 26)

• 8:30 US Preliminary GDP. Estimate 1.1%
• 10:00 Federal Reserve Chair Janet Yellen Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.6
• All Day – Jackson Hole Symposium

*Key events are in bold

*All release times are EDT

USD/JPY for Thursday, August 25, 2016

USD/JPY August 25 at 7:20 EDT

Open: 100.57 High: 100.62  Low: 100.30 Close: 100.41

USD/JPY Technical

• USD/JPY has shown limited movement in the Asian and European sessions
• 99.71 is providing support
• 101.20 remains a strong resistance line
• Current range: 99.71 to 101.20

Further levels in both directions:

• Below: 99.71, 98.95 and 97.78
•  Above: 101.20, 102.36, 103.73 and 104.99

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged on Thursday, consistent with the lack of movement from USD/JPY. Currently, long positions have a strong majority (72%), indicative of trader bias towards USD/JPY breaking out and moving to higher ground.

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