The Japanese yen is mixed today. The yen is weakening against the US dollar, but fairly stable against other currencies. Yesterday, USD/JPY found buyers at 109, and continues to move up today. Following yesterday's move, support for the pair is currently at 109.20 (today's opening price), while resistance is closer to 111.50.
Turning to recent news from Japan, the year-over-year Tokyo price index was below expectations. As the outlook for both growth and inflation remain weak, expectations for tighter monetary policy are falling. For now, this is keeping the currency in a bearish trend, especially against the US dollar. As we have written before, the yen serves as a proxy for inflation when risk sentiment remains supportive.
As growth outside the United States falters, yen pairs except USD/JPY are mostly in a bearish trend. This is because risk sentiment is much weaker in regions such as the Eurozone, China and in emerging markets. Relatively strong US growth means that USD/JPY should keep rising. Our short-term and medium-term outlook on the yen remains bearish.
USD/JPY is currently trading above 109.30. EUR/JPY is flat and trading above 127.80.
In this week’s Japanese yen economic calendar, we’ll see trade and sentiment figures. The adjusted merchandise trade balance for April was +¥550.0b (ahead of expectations for a deficit of -¥37.1b). Unfortunately, this came at the expense of weakening export and import growth. May Nikkei manufacturing PMIs (52.5 vs. 53.6 expected) and the MoM all-industry activity index for March (0% vs. 0.1% expected) both missed expectations. Weekly foreign bond investment (¥948.9b) and foreign investments in Japanese stocks (¥99.1b) continues to suggest outflows from Japan. The leading economic index for March (104.4 vs. 105.6 expected) was below expectations. The May Tokyo consumer price index (0.4% vs. 0.5% expected) was below expectations. Last week, Q1 GDP growth was significantly below consensus estimates.