Forex: USD/JPY awaits US CPI

on Jan 16, 2014
Updated: Oct 21, 2019

**, Thursday 16 January:**

The highlight today for the USD/JPY is the US CPI release for December, due out at 13.30 UTC. The Federal Reserve modified its forward guidance in December saying that the central bank may postpone rate hikes even if the jobless rate slips below the 6.5 percent no-rate-hike threshold, if inflation does not pick up.
The headline CPI is expected to rise to 1.5 percent y/y from November’s 1.2 percent, but the core reading – the one the market pays attention to – is widely anticipated to stay unchanged at 1.7 percent.

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Japan’s Tertiary Industry Activity came out yesterday at 23.50 UTC, showing a 0.6 percent m/m increase in November and undershooting the market consensus for a rise 0.8 percent. Nevertheless, this was a big turnaround from November’s 0.9 percent drop, revised down from -0.7 percent.
November’s report for Japan’s Machinery Orders was released at the same time, which indicated a jump of 9.3 percent m/m for core orders, comfortably exceeding analysts’ expectation for growth of 1.2 percent and the prior month’s 0.6 percent.

What’s more, the Japanese Corporate Goods Price Index for December checked in at 2.5 percent y/y, marginally below November’s 2.6 percent but well above the median economists’ estimate for a minor gain of 0.4 percent.
Despite the broadly positive data, the Nikkei 225 edged 0.39 percent lower today and closed at 15,747.20, seemingly weighted by profit-taking after yesterday’s 2.5 percent gain.

In contrast, the USD/JPY has today extended its two consecutive intraday gains, but the currency pair has failed to exceed the psychological barrier of 105. Right now, the US dollar is up, trading 0.15 percent higher against the yen at around 104.75
“Following the post NFP bout of liquidation, the market appears more settled” and analysts at Barclays now take a neutral stance on the pair in the short-term. In Barclays’ view: “It would take a move above 105.70 to suggest medium-term gains are resuming to 107.90.”


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