USD/JPY – Yen Improves on Japanese Retail Sales, US GDP Next

USD/JPY has recorded losses in the Tuesday session, erasing the gains from Monday. Currently, USD/JPY is trading at 112.20. On the economic front, Japanese numbers were mixed. Preliminary Industrial Production declined 0.8%, well off the estimate of +0.4%. This was the first decline in 8 months. Retail Sales improved to 1.0%, edging past the forecast of 0.9%. In the US, Preliminary GDP is expected at 2.1%. As well, CB Consumer Confidence is forecast to dip to 111.3 points. As well, President Donald Trump will address a joint session of Congress.

President Trump will deliver his first speech to Congress on Tuesday, and Japanese policymakers will be listening closely. Trump has long complained about the trade imbalance between the two countries, and a currency crisis was brewing earlier in the year, as Trump attacked Japan over currency manipulation due to the low value of the Japanese yen. Prime Minister Shinzo Abe’s recent meeting with Trump resolved the dispute for now, but tensions could escalate if the dollar rises above 120 yen.

Although not officially a State of the Union address, President Trump’s speech could have huge ramifications for the financial markets. Since Trump’s election win, the stock markets are sharply higher and the USD/JPY has soared 9.3%, but the greenback has lost ground since Trump has become president. It’s crunch time, as the markets will be expecting some details about Trump’s economic agenda. Trump recently promised to unveil a “phenomenal” tax reform package and significant spending on infrastructure, but hasn’t provided any details. Tuesday’s speech marks a critical opportunity for the new administration, which is still trying to find its bearings after a rocky first month. If Trump fails to present specifics in terms of numbers or at least some timelines, market sentiment will likely sour, dragging down the US dollar.

The Clash of the Titans

Trump Speech Could Make or Break the Market Rally

USD/JPY Fundamentals

Monday (February 27)

• 18:50 Japanese Preliminary Industrial Production. Estimate 0.4%. Actual -0.8%
• 18:50 Japanese Retail Sales. Estimate 0.9%. Actual 1.0%

Tuesday (February 28)

• 00:05 Japanese Housing Starts. Estimate 3.3%. Actual 12.8%
• 8:30 US Preliminary GDP. Estimate 2.1%
• 8:30 US Goods Trade Balance. Estimate -66.0B
• 8:30 US Preliminary GDP Price Index. Estimate 2.1%
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.5%.
• 9:00 US S&P/CS Composite-20 HPI. Estimate 5.3%
• 9:45 US Chicago PMI. Estimate 53.2
• 10:00 US CB Consumer Confidence. Estimate 111.1
• 10:00 US Richmond Manufacturing Index. Estimate 10
• 21:00 President Trump Speech

Upcoming Key Events

Wednesday (March 1)

• 10:00 US ISM Manufacturing PMI. Estimate 56.2

*All release times are GMT

*Key events are in bold

USD/JPY for Tuesday, February 28, 2017

USD/JPY February 28 at 8:20 EST

Open: 112.74 High: 112.82 Low: 112.10 Close: 112.16

USD/JPY Technical

USD/JPY has posted slight losses in the Asian and European sessions

• 110.94 is providing support
• 112.57 has switched to a resistance role following losses by USD/JPY
• Current range: 110.94 to 112.57

Further levels in both directions:

• Below: 110.94, 109.77 and 109.18
•  Above: 112.57, 113.80, 114.83 and 115.90

OANDA’s Open Positions Ratio

USD/JPY ratio has posted slight gains in short positions. Currently, long positions have a majority (60%), indicative of trader bias towards USD/JPY reversing directions and moving upwards.

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.