USD/JPY – Weak Yen Close To 3-month Lows, US Consumer Confidence Next

USD/JPY has posted slight losses in the Tuesday session, as the pair trades at 104.50. In economic news, today’s highlight in the US is CB Consumer Confidence, with the indicator expected to drop to 101.5 points. Japan will release the Services Producer Price Index, which measures inflation in the corporate sector. On Wednesday, the US releases New Home Sales.

All eyes will be on the Bank of Japan next week, as the central bank holds a policy meeting on October 31. The BoJ has consistently sent out messages to the markets that it is willing to adopt further easing if needed. However, it’s questionable if the bank is willing to back up its words with action, as it has stayed on the sidelines for most of 2016 despite a weak economy and deflation concerns. With the Abe government approving a large stimulus program in August, the BoJ may have taken a back seat in the battle to coax inflation and growth to higher levels. If the bank doesn’t adopt any easing measures at the next policy meeting, the yen could recover some of its recent losses to the greenback.

With the US labor market close to capacity, jobless claims surprised the markets by climbing to 260 thousand, higher than expected. This marked the first reading since August that the key indicator has not beaten the estimate. Still, the dollar didn’t lose any ground, as the 4-week daily average of jobless claims remains excellent. There was good news from the manufacturing front, as the Philly Fed Manufacturing Index posted a strong gain of 9.7 points, easily beating the forecast of 5.2 points. On the inflation front, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 68 percent, as market sentiment remains high that the Fed will press the rate trigger before the end of the year.

USD/JPY Fundamentals

Tuesday (October 25)

  • 9:00 US HPI. Estimate 0.5%
  • 10:00 US S&P/CS Composite-20 HPI. Estimate 5.1%
  • 10:00 US CB Consumer Confidence. Estimate 101.5
  • 10:00 IBF/TIPP Economic Optimism. Estimate 47.6
  • 10:00 US Richmond Manufacturing Index. Estimate -5 points
  • 19:50 Japanese SPPI. Estimate 0.2%

Wednesday (October 26)

  • 10:00 US New Home Sales. Estimate 601K

*All release times are EDT

*Key events are in bold

USD/JPY for Tuesday, October 25, 2016

USD/JPY Oct 24,2016 To Oct 26,2016

USD/JPY October 25 at 7:15 EDT

Open: 104.32 High: 104.60 Low: 104.26 Close: 104.53

USD/JPY Technical

  • USD/JPY showed little movement in the Asian session and has posted slight gains in the European session
  • 104.32 is a weak support line
  • There is resistance at 105.44
  • Current range: 104.32 to 105.44

Further levels in both directions:

  • Below: 104.32, 103.02, 102.36 and 101.20
  • Above: 105.44, 106.72 and 107.49

OANDA’s Open Positions Ratio

USD/JPY ratio is showing long positions with a slight majority (54%), indicative of slight trader bias towards USD/JPY continuing to move higher.

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