After rebounding yesterday, the yen is back to selling off today. A large amount of economic data was released today. While inflation figures met expectations (0.7% core CPI), retail sales widely missed estimates (1.7% vs. 2.6% expected). As Japan's economy remains sluggish, the yen has sold off today accordingly. Yesterday, the yen gained as markets began to surface its initial doubts regarding Trump's ability to pass tax reforms.
USD/JPY is currently trading above 112.60, having fallen down to 112.30 at the end of the day yesterday. The yen has weakened against the euro today, with EUR/JPY now above 132.870.
There is no more economic data of any significance this week. Next week, investors will be focused on the Tankan surveys, consumer confidence and foreign reserve data.
After rebounding on September 28 on dollar weakness, we are now neutral on the yen in the short-term. After peaking in the first week of September, the currency has sold off sharply in the rest of the month on waning North Korea-related risks and rising optimism for the US dollar. The yen currency index is now looking oversold in the short-term time frame, based on various technical indicators.
The yen has sold off for three consecutive weeks in September, and our medium-term outlook on the currency remains bearish. As political risks subside in the Korean Peninsula and expectations for interest rate hikes grow in the US, the yen has encountered a bout of weakness. Looking at the yen on a weekly chart, the currency remains far from overbought or oversold levels looking at various technical indicators. Thus trading conditions remain normal.