US Data (11/20): Inflation, Jobs, Manufacturing, Housing: USD/JPY Reaction

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US Data (11/20): Inflation, Jobs, Manufacturing, Housing: USD/JPY Reaction

Today we got a slew of US data. Let’s take a look at the data sets and assess the reaction in the USD/JPY.

US CPI m/m (October): 0.0%; Forecast: -0.1%; Previous: 0.1%
Core CPI m/m (Oct.): 0.2%; Forecast: 0.2%; Previous: 0.1%
US Jobless Claims (this week): 291K; Forecast: 286K; Previous week: 293K
US Flash Manufacturing PMI (Nov.): 54.7; Forecast: 56.2; Previous: 55.9
Philly Fed Manufacturing (Nov.): 40.8; Forecast: 18.9; Previous: 20.7
Existing Home Sales (Oct.): 5.26M; Forecast: 5.16M; Previous: 5.18M

US CPI m/m 
cpi m/m nov. 2014
(click to enlarge; source: forexfactory.com)

The main focus is probably on the inflation data. Yesterday, the FOMC meeting minutes revealed caution on declining inflation expectations. We say inflation data fall on a monthly basis for the first time this year in August, and the October headline reading was forecast to be slightly negative as well. Instead we have a flat reading, which is really no consolation. Inflation is still at a level where the FOMC won’t be able to raise rates, but the Fed is expecting inflation to pick up by mid-2015. We just haven’t seen evidence of that starting yet.

Jobless claims data was decent, and no longer has much impact on the USD these days. US Manufacturing PMI fell showing a deceleration of manufacturing growth to the weakest pace of growth since January.
us manufacturing pmi
(source: markit)

Manufacturing in the Philadelphia Fed region is showing stronger growth in November. The 40.8 reading is the highest since March 2011, when it was 43.4. We therefore have mixed manufacturing readings, and there is no clear takeaway here.

Finally, housing data continue to show recovery with th annualized existing home sales data in October being the highest this year. The 5.17M reading was a positive surprise, but is not impressive enough to suggest any faster pace for the recovery in the housing market, which is considered a slow crawl at the moment.

With today’s data being mixed, how will the USD/JPY respond?

USD/JPY 1H Chart 11/20
usdjpy 1h chart 11/20
(click to enlarge)

First of all, the pair is on a bullish trend, and the 120 psychological handle is in sight. During the 11/20 session, price stalled just under 119 and retreated. After the US data, USD/JPY fell to 117.75 where it looks to be setting now for the rest of the US session.

The 1H USD/JPY is still bullish. After today’s brief pullback, if price breaks back above an intra-session resistance pivot of 118.41, we should expect a bullish continuation attempt to test the 118.95-119 area, with risk of breaking higher and maintaining the 120 bullish target.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.