The yen continues to languish in short-term oversold territory, and looks due for a rebound. This morning, the currency is gaining against the US dollar, following additional news reports that Jerome Powell is likely to be the next Fed Chair. In the past week, global bond yields have reversed direction and are now falling. Our expectation is that the yen is more likely to strengthen as a result. Cross-border stock and bond investment data released today showed that Japanese investors continue to buy foreign bonds while foreigners buy Japanese stocks.
USD/JPY is currently trading just below 114. EUR/JPY has been rebounding and is currently trading above 132.80.
As expected, the BoJ meeting was a non-event as the Bank remains committed to its current policies. Retail sales numbers missed expectations (2.2% vs. 2.5% expected). Unemployment figures came within expectations (2.8%) while household spending was much weaker than expectations (-0.3% vs. 0.7% expected). Nikkei manufacturing PMIs were slighly lower relative to the prior figures (52.8 vs. 52.9 prior). Cross-border stock investments showed that foreigners continue to buy Japanese stocks (697b vs 683b) while Japanese investors buy foreign bonds (-1084 vs 11b prior). Last week saw low CPI figures miss expectations.
The yen remains weak, and as such we are downgrading the currency to bearish in the short-term. The yen is selling off despite falling bond global yields. Note that the currency is once again looking oversold, based on technical indicators on the daily chart.
After rising on lower global bond yields, we are upgrading the yen to neutral. 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.