After hitting oversold conditions earlier this week, the yen is bouncing back this morning. Earlier in the week, the yen weakened on the Bank of Japan's tankan survey that showed manufacturing growth at its highest levels in a decade. As positive data out of Japan typically boosts risk sentiment (causing Japanese investors to park their funds offshore), the yen fell on the news.
USD/JPY is currently trading just below 112.70, having risen above 113 yesterday. EUR/JPY continues to trade flat, with the pair trading above 132.40 currently.
Looking at economic data this week, on Monday the BoJ's tankan's survey painted a rosy picture of manufacturing expectations (big manufacturers outlook of 19 vs. 16 expected). On Tuesday. consumer confidence figures came in above the last reading (43.9 vs. 43.3 previous). On Thursday, we'll see data regarding Japanese investments in foreign bonds and stocks. Finally, foreign reserve data and leading indicators will be published on Friday.
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.