USD/JPY: Flat, EUR/JPY: Long

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USD/JPY: Flat, EUR/JPY: Long

• Friday’s data showed that Japan’s core consumer price index, which includes oil products but excludes volatile fresh food prices, rose 0.1% yoy in November, against a median market forecast for a flat reading. The rise followed a 0.1% drop in October and came as higher food prices moderated the pressure from slumping energy costs. A separate BOJ index that excludes oil and fresh food - but includes processed food prices - showed consumer prices rose 1.2% yoy in November, as companies passed on to consumers the higher import costs from a weak JPY. 

• But household spending suffered the biggest annual fall in eight months, down 2.9% in November from a year earlier and exceeding a median forecast for a 2.4% decline. Economics Minister Akira Amari was upbeat on the outlook, pointing to rising real wages and blaming weak November spending on unusually warm weather that hurt sales of winter clothing. 

• Today’s data showed Japan’s industrial output fell 1.0% in November from the previous month, more than a median market forecast for a 0.6% decline. Manufacturers surveyed by the trade ministry expect to increase production by 0.9% in December and raise it by 6.0% in January. 

• Separate data showed that retail sales fell 1.0% in November from a year earlier, more than a median forecast for a 0.6% drop, as warm weather hurt sales of winter clothing.

• Japan's economy narrowly dodged recession in July-September and we expect only modest growth in the current quarter, as consumption and exports lack steam.

• Wary of soft growth, the government plans record spending in the budget for the fiscal year that will begin on April 1. The proposed budget underscores the challenge Abe faces in striking a balance between the need to stimulate the flagging economy ahead of an upper house election and to curb the world's heaviest public debt burden at the same time. Tax revenue is estimated at a 25-year high of JPY 57.6 trillion on the back of rising corporate profits, allowing Tokyo to cut fresh borrowing to an eight-year low of JPY 34.43 trillion. This would bring Japan's fiscal dependence, the ratio of bond issuance to budget revenue, to 35.6% - the lowest since fiscal 2008, just before the global financial crisis hit Japanese economy.

• The government has set an interim target of reducing the primary budget deficit to 1% of GDP in fiscal 2018, aiming to limit rises in general spending to about JPY 1.6 trillion over the coming three years.

• Japanese data released today were JPY-bearish, although the market's reaction was muted. The USD/JPY is rising slightly, but we stay sideways as we expect weaker USD in the coming days. We used EUR drop on Wednesday to get EUR/JPY long at 131.85.

MAJOR PAIRS:

MAJOR CROSSES:

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea: BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level. LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!

6. Profit/Loss on recently closed position - is the amount of pips we have earned/lost on recently closed position