USD/JPY – Yen Edges Higher Ahead of Consumer Spending and Inflation Numbers

USD/JPY is showing little movement in the Tuesday session, as the pair trades at 117.30. On the release front, Japanese Household Spending and Tokyo Core CPI both missed their estimates.  In the US, today’s highlight is CB Consumer Confidence, with the indicator expected to climb to 108.9 points. On Wednesday, the US releases Pending Home Sales, with the markets anticipating a strong gain of 0.6%.

Japanese indicators started the week on a sour note, as consumer data was soft. 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.

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 3.2%. 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.

US indicators ended the week on a high note. New Home Sales jumped to 592 thousand, which translated into an increase of 5.2%. This easily beat the forecast of 575 thousand. There was more good news from UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. The indicator was sharply higher than the previous reading of 93.2 points. The survey found that consumers are optimistic that the economy will continue to improve under Donald Trump. The president-elect has said he will cut taxes while increasing fiscal spending in order to pay for massive infrastructure improvements. The survey also noted that consumers expect economic growth to create new jobs and raise incomes.

*All release times are GMT

*Key events are in bold

Monday (December 26)

• 18:30 Japanese Household Spending. Estimate 0.2%. Actual -1.5%
• 18:30 Japanese Tokyo Core CPI. Estimate -0.4%. Actual -0.6%
• 18:30 Japanese National Core CPI. Estimate -0.3%. Actual -0.4%
• 18:30 Japanese Unemployment Rate. Estimate 3.0%. Actual 3.1%

Tuesday (December 27)

• 00:00 BoJ Core CPI. Estimate 0.2%. Actual 0.2%
• 00:00 Japanese Housing Starts. Estimate 9.6%. Actual 6.7%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.0%
• 10:00 US CB Consumer Confidence. Estimate 108.9
• 10:00 US Richmond Manufacturing Index. Estimate 5 points

Wednesday (December 28)

• 10:00 US Pending Home Sales. Estimate 0.6%

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, December 27, 2016

USD/JPY December 27 at 7:00 EST

Open: 117.19 High: 117.46 Low: 117.17 Close: 117.31

USD/JPY Technical

• USD/JPY posted slight gains in the Asian session and has been flat in the European session
• 116.88 is providing support
• 118.05 is the next 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 long positions with a majority (55%). This is indicative of trader bias towards USD/JPY continuing to move higher.

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.