USD/JPY is showing little movement in the Tuesday session, as the pair trades slightly below the 104 level. On the release front, the US releases key consumer inflation numbers. Both CPI and Core CPI are expected to show small gains in the September release. There are no Japanese releases on the schedule. On Wednesday, there is one key release – Building Permits.
US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UofM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.
The markets are keeping a close eye on Tuesday’s CPI and Core CPI releases, and these numbers could have an important bearing on the Fed’s rate decision in December. Currently, a December rate hike is currently priced in at 64 percent.
The yen lost ground last week, following dovish remarks from the Bank of Japan. Kuroda stated that the bank was unlikely to meet its inflation target of 2% before 2018, but that the BoJ had no intention of changing course, saying it would continue or even strengthen monetary easing in order to achieve its inflation target. The next BoJ policy meeting takes place on October 31 and the markets will be looking for hints as to whether the bank intends to remain on the sidelines.
Although the BoJ continues to talk tough about adopting further easing, there is some skepticism in the markets as to whether the bank has any monetary ammunition left. The bank cut rates below zero early in 2016, but this has not had the desired effect, as deflation threatens to undermine an already weak economy.
USD/JPY Fundamentals
Tuesday (October 18)
- 8:30 US CPI. Estimate 0.3%
- 8:30 US Core CPI. Estimate 0.2%
- 10:00 US NAHB Housing Market Index. Estimate 64 points
- 16:00 US TIC Long-Term Purchases
Wednesday (October 19)
- 8:30 US Building Permits. Estimate 1.17M
*All release times are EDT
*Key events are in bold
USD/JPY for Tuesday, October 18, 2016
USD/JPY October 18 at 6:50 EDT
Open: 103.85 High: 104.13 Low: 103.68 Close: 103.86
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 101.20 | 102.36 | 103.02 | 104.32 | 105.44 | 106.72 |
- USD/JPY has posted limited movement in the Asian session. The pair posted slight gains in the European session but then retracted
- 103.02 is providing support
- There is resistance at 104.32
- Current range: 103.02 to 104.32
Further levels in both directions:
- Below: 103.02, 102.36, 101.20 and 100.55
- Above: 104.32, 105.44 and 106.72
OANDA’s Open Positions Ratio
USD/JPY ratio is showing a slight majority in long positions (54%), indicative of slight trader bias towards USD/JPY breaking out and moving higher.