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USD/JPY Signal - U.S. PPI - 14 Mar 2017

Signal details
Entry Price: 
115.25
Close Price: 
114.70
Direction: 
Low
Expiry Time: 
21:00 GMT
Result: 
ITM
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The U.S. producer price index data for the month of February will be released today at 1230 GMT. Economists polled expect the headline PPI to rise 0.1% and core PPI to rise 0.2% for the month of February. This would be a slower pace of increase compared to January's 0.6% and 0.4% increase. On a year over year basis however, U.S. producer prices are expected to continue expanding, rising at a pace of 1.5% on the year and 1.9% on the headline. This would potentially keep the PPI in line or push closer to the 2% threshold and could possible indicate continued underlying pressures on consumer inflation building up.

Last month, most of the gains came from an increase in the final demand for goods index. It was the largest increase since May 2015 and therefore the PPI is expected to pull back in the month of February. The PPI data will weigh on investors as they anticipate the U.S. Federal Reserve to hike interest rates tomorrow by 25 basis points.

USDJPY has been wavering for the past few sessions and the currency pair is likely to come under volatility over the next two days. Various events contributing to the volatility includes the FOMC meeting and the Netherlands elections on Wednesday followed by Thursday's Bank of Japan meeting. All of these, combined together could make trading extremely choppy for USDJPY.

Ahead of today's PPI data from the U.S. the USDJPY currency pair is expected to make strong gains. We can expect a near term rally towards 115.20 - 115.42 where USDJPY could turn flat. Thus, purchasing daily PUT options around 115.25 or within 115.42 will be ideal for a 21:00 GMT expiry time on an anticipated decline to the upside rally. The Stochastics oscillator is also turning showing signs of the rally being exhausted.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.