The Japanese yen is unchanged in the Tuesday session. In North American trade, USD/JPY is trading at 113.65, up 0.17% on the day. On the release front, Japanese indicators pointed upwards and beat their estimates. PPI rebounded with a gain of 3.5%, above the estimate of 3.3%. Tertiary Industry Activity gained 0.3%, edging above the estimate of 0.2%. In the US, PPI posted a gain of 0.4%, matching the estimate. Core PPI came in at 0.3%, above the estimate of 0.2%. Later in the day, Japan releases Core Machinery Orders, which is expected to gain 2.8%. On Wednesday, the Federal Reserve is expected to raise rates to a range between 1.25% to 1.50%. As well, the US releases CPI reports.
All eyes are on the Federal Reserve, which meets on Wednesday for a policy meeting. The markets are expecting a quarter-point rate hike. Another rate hike is expected in January, with fed futures pricing a rate hike at 87%. The Fed has hinted that it could raise rates up to three times in 2018, and this upward movement in rates will likely propel the US dollar upwards. The US labor market remains at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages.
Is the Bank of Japan preparing the ground for a change in monetary policy? Kuroda has long insisted that there will be no reduction of stimulus until the Bank’s inflation target of 2% is met. There has been pressure on him to reconsider, given the marked improvement in Japanese economy this year. However, the governor has recently dropped subtle hints about easing monetary policy. Last week, Kuroda said that a change in economic conditions could lead the BoJ to raise its yield target, which would be a significant change to current policy. Kuroda noted that an exit from quantitative and qualitative easing would be “quite an important topic” to communicate to the markets. Although the BoJ is unlikely to tighten policy before next year at the earliest, these deliberate hints indicated that the Bank is preparing for a time when conditions will warrant tightening monetary policy, after years of an ultra-accommodative stance.
USD/JPY Fundamentals
Monday (December 11)
- 18:50 Japanese PPI. Estimate 3.3%. Actual 3.5%
- 23:30 Japanese Tertiary Industry Activity. Estimate 0.2%. Actual 0.3%
Tuesday (December 12)
- 6:00 US NFIB Small Business Index. Estimate 104.6. Actual 107.5
- 8:30 US PPI. Estimate 0.4%. Actual 0.4%
- 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
- 13:01 US 30-year Bond Auction
- 14:00 US Federal Budget Balance. Estimate -135.2B
- 18:50 Japanese Core Machinery Orders. Estimate 2.8%
Wednesday (December 13)
- 8:30 US CPI. Estimate 0.4%
- 8:30 US Core CPI. Estimate 0.2%
- 14:00 US FOMC Economic Projections
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. Estimate <1.50%
- 14:00 US FOMC Press Conference
*All release times are GMT
*Key events are in bold
USD/JPY for Tuesday, December 12, 2017
USD/JPY December 12 at 10:15 EDT
Open: 113.56 High: 113.65 Low: 113.37 Close: 113.64
USD/JPY Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 111.53 | 112.57 | 113.55 | 114.59 | 115.50 | 116.54 |
USD/JPY was flat in the Asian and European sessions. The pair has posted small gains in North American trade
- 113.55 was tested earlier in support and remains a weak line
- 114.59 is the next resistance line
Current range: 113.55 to 114.59
Further levels in both directions:
- Below: 113.55, 112.57, 111.53, 110.10
- Above: 114.59, 115.50 and 116.54
OANDA’s Open Positions Ratios
USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (54%), indicative of trader bias towards USD/JPY breaking out and moving lower.