The yen continues to languish in short-term oversold territory, and is mostly weak against major currencies including the US dollar and the euro. The yen's weakness is especially surprising considering that global bond yields continue to fall. Typically, the yen strengthens as yield differentials between the yen and other currencies narrow. Given the Bank of Japan's 'yield curve control' program, 10-year interest rates on Japanese bonds are fixed at 0% via the Bank's trading program. In other news, leading indicators for the Japanese economy were lower versus previous figures, suggesting a weak outlook for growth.
USD/JPY is currently trading below 114, and is close to 113.80. Looking at the euro vs. the yen, EUR/JPY is flat and is currently trading above 132.10.
Looking at the economic calendar for the yen, this week’s announcements include survey data, cross-border investment figures and a speech from the Bank of the Japan’s governor. On Monday, Governor Kuroda suggested that easy monetary policies will continue. Nikkei Services (53.4) and Composite PMIs (53.4) for October were both higher relative to previous figures. On Tuesday, labor cash earnings beat expectations (0.9% vs. 0.5% expected) while real cash earnings disappointed (-1% vs. -0.2% expected). The leading index (-0.6 vs. 2 prior) and the coincident index (-1.9 vs. 2 prior) were both lower, suggesting that future economic may be lower. Finally on Thursday, we’ll see the Eco Watchers Survey, Machine Orders, cross-border stock and bond investments and bank lending. Last week, retail sales missed expectations.
As bond yields continue to trade sideways, we are upgrading the yen to neutral in the short-term. Note that the currency is 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 is looking oversold based on various technical indicators. This is based on various technical indicators.