USD/JPY - Yen Dips Lower On Mixed Japanese Numbers

| About: CurrencyShares Japanese (FXY)

By Kenny Fisher

USD/JPY has posted slight gains in the Wednesday session, as the pair continues to have a quiet week. Currently, the pair is trading at 117.70. The markets are likely to remain listless for the remainder of the week, as many investors have closed books prior to the end of the year, resulting in thin liquidity in the market. In the US, today’s sole event is Pending Home Sales. The indicator is expected to jump to 0.6%. Japan will release the BoJ Summary of Opinions, which provides the BoJ’s projections for growth and inflation. On Thursday, the US will release unemployment claims, with the estimate standing at 277 thousand.

Japanese numbers were a mix on Wednesday. Preliminary Industrial Production gained 1.5%, but this fell short of the forecast of 1.8%. There was better news from retail sales which posted a strong gain of 1.7%. Earlier in the week, consumer indicators disappointed. Household Spending declined 1.5%, marking a ninth straight decline. The markets had predicted a small gain of 0.2%. The Japanese economy continues to grapple with deflation, as underscored by Tokyo Core CPI. The key indicator came in at -0.6%, weaker than the estimate of -0.4%. The BoJ continues to cling to its inflation target of 2.0%, but this goal is unlikely to be realized anytime soon. At the same time, the Japanese yen has weakened and if the currency continues to head south, inflation levels could move higher.

As 2016 wraps up, US consumers are brimming with confidence, in what analysts are describing as a post-election surge in optimism. The CB Consumer Confidence report surged in December to 113.7, its highest level since August 2001. This reading comes on the heels of UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. Clearly, consumers are optimistic that the economy will continue to improve under Donald Trump. Both of these well-respected surveys found that consumers are confident that continuing economic growth will create new jobs and raise incomes. Trump’s economic platform remains short on details, but he has promised to cut taxes while increasing public spending. If Trump manages to implement both of these goals, the US economy could heat up and also help global growth pick up speed. In late November, the OECD revised upwards its 2017 growth projections for the US from 2.1% to 2.3%.

The US economy continues to expand at a brisk clip, as underscored by the most recent revision to third quarter GDP. The Final GDP reading of 3.5% beat the estimate of 3.3%. This figure marked an upward revision of the previous GDP estimate of 3.2%. The stellar reading can be attributed to stronger consumer spending and an increase in business investment, and marked the strongest growth rate since the third quarter of 2015. With consumer confidence at high levels and the labor market close to capacity, fourth quarter GDP readings could follow suit with strong numbers.

*All release times are GMT

*Key events are in bold

Tuesday (December 27)

  • 18:50 Japanese Preliminary Industrial Production. Estimate 1.8%. Actual 1.5%
  • 18:50 Japanese Retail Sales. Estimate 0.9%. Actual 1.7%

Wednesday (December 28)

  • 10:00 US Pending Home Sales. Estimate 0.6%
  • 18:50 BoJ Summary of Opinions

Thursday (December 29)

  • 8:30 US Unemployment Claims. Estimate 277K

*All release times are GMT

*Key events are in bold

USD/JPY for Wednesday, December 28, 2016

USD/JPY December 28 at 8:00 EST

Open: 117.48 High: 117.81 Low: 117.36 Close: 117.71

USD/JPY Technical

S3 S2 S1 R1 R2 R3
114.83 115.88 116.88 118.05 118.85 119.83
  • USD/JPY was flat in the Asian session and has posted slight gains in European session
  • 116.88 is providing support
  • 118.05 is a weak resistance line
  • Current range: 116.88 to 118.05

Further levels in both directions:

  • Below: 116.88, 115.88 and 114.83
  • Above: 118.05, 118.85, 119.83 and 121.44

OANDA’s Open Positions Ratio

USD/JPY ratio is showing slight gains in short positions. Currently, long positions have a slim majority (52%), indicative of slight trader bias towards USD/JPY continuing to move higher.