USD/JPY: Yen Slips To 2-Week Low, U.S. Consumer Confidence Next

USD/JPY has posted considerable gains on Tuesday, as the pair trades at 110.60 in the North American session. On the release front, Japanese SPPI remained at 0.8%, edging above the agreement of 0.7%. Over in the US, we’ll get a look at two key events. CB Consumer Confidence is expected to improve to 123.7, while New Home Sales is forecast to edge lower to 590 thousand.

Japanese SPPI, which measures inflation in the corporate sector, posted a solid reading of 0.8%, but other inflation indicators haven’t kept pace. We’ll get a look at more inflation numbers, highlighted by Tokyo Core CPI, the primary gauge of consumer inflation has posted a steady stream of declines, and a decline of 0.2% is expected in the April reading. If the indicator misses expectations, the yen could lose more ground.

The Bank of Japan will release its monetary policy statement on Wednesday, and is expected to maintain interest rates at -0.10%. The negative rates are part of the BoJ’s ultra-loose monetary policy, which is expected to continue until inflation levels move closer to the central bank’s target of around 2 percent. Japan’s economy has improved in recent months, as a weak yen and stronger global demand have boosted exports and boosted the manufacturing sector. However, Japanese policymakers need to tread carefully, as Japan’s trade surplus has triggered sharp criticism from the US President Trump.

The weak yen has also drawn Trump’s ire, as he recently called out Japan for manipulating its currency for trade purposes. Still, the most recent US Treasury Currency Report, did not name Japan as a currency manipulator. If the yen weakens and heads back towards the 120 level, the Japanese are likely to get an earful from Trump about unfair trade practices.

President Trump will have to reach out to the Democrats in order to avoid a shutdown of the federal government on Saturday. Congress must pass a spending bill which will fund the government until October, but the bill requires the backing of 60 senators. This means that the Republicans (who control 52 seats) will need the support of 8 Democrats. This has led to bipartisan negotiations, and it’s reasonable to expect that these talks could go down to the wire, as both sides try to stick to their positions and try not to blink first. The last shutdown was in 2013, lasting 17 days. Another shutdown would be embarrassing for Trump, as it would start on his 100th day in office and would cast doubts on his ability to push his budget and tax plan through Congress.

USD/JPY Fundamentals

Monday (April 24)

  • 19:50 Japanese SPPI. Estimate 0.7%. Actual 0.8%

Tuesday (April 25)

  • 9:00 US HPI. Estimate 0.1%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%
  • 10:00 US CB Consumer Confidence. Estimate 123.7
  • 10:00 US New Home Sales. Estimate 590K
  • 10:00 US Richmond Manufacturing Index. Estimate 18

Wednesday (April 26)

  • 00:30 Japanese All Industries Activity. Estimate 0.8%

*All release times are EST

*Key events are in bold

USD/JPY for Tuesday, April 25, 2017

USD/JPY Apr 24 – 26 Chart

USD/JPY April 25 at 9:25 EST

Open: 109.62 High: 110.69 Low: 109.62 Close: 110.65

USD/JPY Technical

S3S2S1R1R2R3107.49108.54109.77110.94112.57113.80

USD/JPY posted gains in the Asian and European sessions. The pair continues to gain ground in North American trade

  • 109.77 is providing support
  • 110.94 has weakened in resistance following strong gains by USD/JPY
  • Current range: 109.77 to 110.94

Further levels in both directions:

  • Below: 109.77, 108.54, 107.49 and 106.14
  • Above: 110.94, 112.57 and 113.80

OANDA’s Open Positions Ratio

USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (62%). This is indicative of trader bias towards USD/JPY continuing to move upwards.

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