USD/JPY - Japanese Consumer Spending Reports Mixed, Yen Steady

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Includes: FXY, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/JPY has posted slight gains on Tuesday, as the pair trades at 113.60 in the European session. On the release front, Japanese Household Spending posted a gain of 1.2 percent, above expectations. However, Retail Sales was well short of the forecast, with a reading of 0.5 percent. Japan releases Preliminary Industrial Production later on Tuesday, with the markets braced for a sharp drop of 5.8 percent. Over in the US, CB Consumer Confidence is expected to climb to 93.9 points. As well, Federal Reserve Janet Yellen will deliver remarks at the Economic Club in New York City.

The Japanese economy has been sluggish, and any improvement in the situation will require Japanese consumers to open their wallet strings and spend more. On Monday, Japanese consumer spending indicators were mixed. Retail Sales broke a nasty streak of three consecutive declines, posting a gain of 0.5 percent in February. There was better news from Household Spending, which posted a strong gain of 1.2 percent, after five consecutive declines. Market focus will next shift to the Tankan Indices, key quarterly indicators which gauge the strength of the services and manufacturing sectors.

US economic growth in the fourth quarter was respectable, but there are signs that we could see softer numbers for the first quarter of 2016. The Atlanta Fed downgraded its forecast for Q1 from 1.4 percent to 0.6 percent. The original forecast, released just last week, was lowered in response to a downgraded forecast of personal income and outlays by the US Bureau of Economic Analysis. US Final GDP for the fourth quarter rose 1.4 percent, above the estimate of 1.0 percent, but lower than the 2.0 percent gain in the third quarter. If US economic activity did in fact weaken in Q1, we could see the US dollar lose ground.

After a dovish policy statement from the Fed earlier this month, an interest rate hike did not seem likely before June. However, a flurry of hawkish statements from Federal Reserve members last week caught the markets by surprise and resulted in broad gains for the dollar, as the Japanese yen slipped 150 points. With some Fed members calling for a rate hike as early as April, the markets will be looking for some guidance from Fed chair Janet Yellen, who will make a speech in New York later on Tuesday. If Yellen does not rule out an April move, speculation of an imminent rate hike will increase, and the US dollar could respond with broad gains.

USD/JPY Fundamentals

Monday (March 28)

  • 19:30 Japanese Household Spending. Estimate -1.8%. Actual +1.2%
  • 19:50 Japanese Retail Sales. Estimate 1.6%. Actual 0.5%.

Tuesday (March 29)

  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%
  • 10:00 US CB Consumer Confidence. Estimate 93.9
  • 12:20 US Federal Reserve Chair Janet Yellen Speaks
  • 19:50 Japanese Preliminary Industrial Production. Estimate -5.8%

Upcoming Key Events

Wednesday (March 30)

  • 12:15 ADP Nonfarm Employment Change. Estimate 194K

*Key releases are highlighted in bold

*All release times are DST

USD/JPY for Tuesday, March 29, 2016

USD/JPY March 29 at 10:50 DST

Open: 113.36 Low: 113.22 High: 113.80 Close: 113.60

USD/JPY Technical

S3 S2 S1 R1 R2 R3
109.87 111.50 112.48 113.86 114.65 115.59
Click to enlarge
  • USD/JPY showed small gains in the Asian session. The pair has been steady in the European session
  • 112.48 is providing support
  • 113.86 is a weak resistance line and could break during the day
  • Current range: 112.48 to 113.86

Further levels in both directions:

  • Below: 112.48, 111.50, 109.87 and 108.37
  • Above: 113.86, 114.65 and 115.59

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged this week, consistent with the lack of movement from USD/JPY. Long positions command a strong majority (61%), indicative of strong trader bias towards the pair moving to higher levels.

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.