USD/JPY Edges Higher, Japanese Inflation and Consumer Spending Next
MarketPulse | Sep 28, 2016 07:39AM ET
The yen continues to show limited movement, as USD/JPY trades at 100.70. In the US, today’s key event is durable goods orders. The markets are bracing for a decline from Core Durable Goods Orders, with an estimate of -0.5%.
As well, Federal Reserve chair Janet Yellen will testify before the House Committee on Financial Services. Japan will release retail sales. On Thursday, the US will release Final GDP and unemployment claims. We’ll also get a look at Tokyo Core CPI and Household Spending.
On Monday, BoJ Governor Haruhiko Kuroda said that the bank did not expect to make any major changes in its bond-buying scheme. The markets took this as a sign that the BoJ will stick with its current monetary policy, which has allowed the yen to climb 17 percent since January, when the BoJ first adopted negative rates.
The yen last pushed below the 100 level in late August, and Japanese currency is again tapping on the door of this symbolic line. Will it break this week? The news from the inflation front was not positive, as SPPI dropped to 0.2% is August, down from 0.4% a month earlier.
US consumer confidence numbers have surged in the past two months. CB Consumer Confidence jumped to 104.1 points in September, much higher than the forecast of 98.6 points. This excellent release improved upon a strong August report of 101.1 points.
Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. The Fed is sure to take note of surging consumer confidence, which could improve the likelihood of a December rate hike.
Federal Reserve chair Janet Yellen will testify before a Congressional committee on Thursday, and her remarks could shed more light on the Fed’s plans regarding a rate hike. Last week, the Fed held interest rates at 0.25%.
The Fed policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike.
Currently, a rate hike is priced in at 44 percent, but plenty can happen before the December policy meeting (the Fed is unlikely to make a move in November, just ahead of the US presidential election). The Fed has consistently stated that the next rate hike will be data-dependent, which means that stronger economic numbers, especially on the inflation front, will increase the likelihood of a December hike.
USD/JPY Fundamentals
Wednesday (September 28)
- 8:30 US Core Durable Goods Orders. Estimate -0.5%
- 8:30 US Durable Goods Orders. Estimate -1.0%
- 10:00 US Fed Chair Janet Yellen Testifies
- 10:10 US FOMC Member James Bullard Speaks
- 10:30 US Crude Oil Inventories. Estimate 2.4M
- 19:15 US FOMC Member Esther George Speaks
- 19:50 Japanese Retail Sales. Estimate -1.7%
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Thursday (September 29)
- 2:35 BoJ Governor Haruhiko Kuroda Speaks
- 8:30 US Final GDP. Estimate 1.3%
- 8:30 US Unemployment Claims. Estimate 260K
- 16:00 US Federal Reserve Chair Janet Yellen Speaks
- 19:30 Japanese Household Spending. Estimate -2.1%
- 19:30 Japanese Tokyo Core CPI. Estimate -0.4%
*All release times are EDT
*Key events are in bold
USD/JPY for Wednesday, September 28, 2016
USD/JPY September 28 at 6:55 EDT
Open: 100.49 High: 100.82 Low: 100.41 Close: 100.74
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 98.95 | 99.71 | 100.55 | 101.20 | 102.36 | 103.73 |
- USD/JPY has posted small gains in the Asian and European session
- 100.55 was tested in support and is a weak line. It could see further action in the North American session
- There is resistance at 101.20
- Current range: 100.55 to 101.20
Further levels in both directions:
- Below: 100.55, 99.71, 98.95 and 97.61
- Above: 101.20, 102.36 and 103.73
OANDA’s Open Positions Ratio
USD/JPY ratio is unchanged on Wednesday. Currently, long positions have a substantial majority (71%), indicative of trader bias towards USD/JPY continuing to move higher.
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