Japanese yen gains after positive Tokyo inflation data

US stocks erased earlier gains yesterday as investors weighed the risks on trade. In a statement to CNBC, Larry Kudlow, chief economic advisor, said that Hong Kong needed to be treated as China. That is after the National People’s Congress voted on a controversial security bill. This means that the US will start applying tariffs on goods from the city. Investors are now waiting to see how China will respond to US provocations. They were also worried about a social media executive order that Trump signed. The order came a day after Twitter fact-checked his claim on election interference. Shares of social media companies like Facebook and Twitter dropped by more than 1%.

The Japanese yen gained slightly as investors reacted to some important data from Japan. In April, the country’s unemployment rate rose to 2.6% from the previous 2.5%. Analysts were expecting the rate to rise to 2.7%. In Tokyo, the core consumer price index rose from the previous -0.1% to 0.2%. The headline CPI rose from 0.2% to 0.4%. On the other hand, the preliminary industrial production in April declined by 9.1% as the state of emergency started. That was worse than the consensus estimates of 13.7%. Also, retail sales dropped by 13.7%.

Looking ahead, we will receive the April retail sales data from Germany today. Analysts polled by Reuters expect the sales to have fallen by 14.2% after falling by 2.8% in the previous month. They expect the import price index to fall by 7.2% on an annualised basis. In the United Kingdom, we will get the house price index for May while in France, we will receive the preliminary inflation data. Other key data we will receive today are the Swedish GDP, eurozone’s CPI, personal spending from the US, and Canadian GDP data.

USD/JPY

The USD/JPY pair declined to an intraday low of 107.35. On the hourly chart, the price is slightly below the 100-day and 50-day exponential moving average. It is also slightly below the important resistance of 107.92, where the pair formed a triple top. The price is also slightly above the 38.2% Fibonacci retracement level. Therefore, it’s expected that the bears will push the price lower to this retracement at 107.27.

EUR/USD

The EUR/USD pair rose to an intraday high of 1.1085, which is the highest it has been since March 30. On the four-hour chart, the price is slightly above the 100-day and 50-day exponential moving averages while the RSI has moved to the overbought level of 70. It is also slightly above the 50% Fibonacci retracement level. Therefore, the price will likely continue rising as bulls attempt to test the 61.8% retracement at 1.1165.

USD/CAD

The USD/CAD has little changed ahead of the Canadian GDP data. It is trading at 1.3775, which is a few pips above yesterday’s low of 1.3720. On the four-hour chart, the price is slightly below the short and medium-term moving averages while the RSI has emerged from the oversold level of 22 while the volatility has waned. The pair will likely see slight volatility after the Canadian GDP data.