Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

USD/JPY Drops On Soft Inflation Report But Recovers

Published 09/27/2016, 06:51 AM
Updated 03/05/2019, 07:15 AM

The yen has shown some movement on Tuesday, although USD/JPY remains unchanged on the day, trading at 100.40. On the release front, the BoJ released the minutes from its July policy meeting. The Services Producer Price Index slipped to 0.2%, short of the forecast of 0.3%. In the US, we’ll get a look at CB Consumer Confidence, a key consumer indicator. The estimate for the September report stands at 98.6 points.

The yen posted gains on Monday, after BoJ Governor Haruhiko Kuroda said that the bank did not expect to make any major changes in its bond-buying scheme. The markets took this as a sign that the BoJ will stick with its current monetary policy, which has allowed the yen to climb 17 percent since January, when the BoJ first adopted negative rates.

The yen last pushed below the 100 level in late August, and Japanese currency is again tapping on the door of this symbolic line. Will it break this week? The news from the inflation front wasn’t positive as SPPI dropped to 0.2% is August, down from 0.4% a month earlier.

The Fed decision to maintain interest rates at 0.25% was widely expected, but there was some drama as three of the ten FOMC members dissented with the decision, preferring to raise rates immediately by a quarter-percentage point. This significant dissent within the FOMC underscores continuing divisiveness within the Fed, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”.

Recent comments from FOMC members regarding a rate hike have conflicted with each other, and the mixed messages have left the markets confused. The surprising level of dissent will do little to restore market confidence in the Fed, which back in December 2015 promised up to four rate hikes in 2015, but so far has yet to raise rates this year.

The Fed policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike.

Currently, a rate hike is priced in at 51 percent, but plenty can happen until the December policy meeting (the Fed is unlikely to make a move in November, just ahead of the US presidential election). The Fed has consistently stated that the next rate hike will be data-dependent, which means that stronger economic numbers, especially on the inflation front, will increase the likelihood of a December hike.

USD/JPY Fundamentals

Monday (September 26)

  • 23:50 BoJ Monetary Policy Meeting Minutes
  • 23:50 Japanese Services Producer Price Index. Estimate 0.2%. Actual 0.3%

Tuesday (September 27)

*All release times are EDT

*Key events are in bold

USD/JPY for Tuesday, September 27, 2016

USD/JPY Sep 26 - 28 Chart

USD/JPY September 27 at 6:25 EDT

Open: 100.37 High: 100.99 Low: 100.07 Close: 100.40

USD/JPY Technical

S3 S2 S1 R1 R2 R3
97.61 98.95 99.71 100.55 101.20 102.36

  • USD/JPY posted considerable gains in the Asian session. In European trade, the pair moved higher but then retracted
  • 99.71 is providing support
  • 100.55 was tested earlier in resistance. It could see further action during the Tuesday session
  • Current range: 99.71 to 100.55

Further levels in both directions:

  • Below: 99.71, 98.95 and 97.61
  • Above: 100.55, 101.20, 102.36 and 103.73

OANDA’s Open Positions Ratio

USD/JPY ratio has shown slight movement towards long positions. Currently, long positions have a substantial majority (71%), indicative of trader bias towards USD/JPY resuming upward movement.

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.