JPY Daily Updates

09 November 2017

After strengthening yesterday, the yen is finally out of short-term oversold territory and is now trading within normal conditions. Looking at news, there were concerns (later refuted) that the US Senate may delay releasing its markup of the tax reform bill later today. Leaks to the media suggesting that the Senate version of the tax bill has significant differences relative to the House version is also driving concerns regarding the tax bill. Given the yen's sensitivity to inflation expectations (the yen typically weakens as global inflation rises), the currency strengthened following the news. Later today, we will upgrade our short-term outlook on the yen to bullish as a result. 

USD/JPY is currently trading below 113.60. Looking at the euro vs. the yen, EUR/JPY is down and is currently trading above 131.70. 

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. The Eco Watchers survey was stronger versus the previous print (52.2 vs. 51.3 prior), machinery orders were much lower relative to expectations (-3.5% vs. 1.9% expected), and the current account was weaker relative to expectations (2271.2b vs. 2375.4b expected). Lastly, cross-border investment statistics suggest that Japanese investors continue to purchase more overseas stocks and bonds. Last week, retail sales missed expectations.

Short term outlook

As the yen rebounds from oversold conditions, we are upgrading the yen to bullish in the short-term. Note that the currency is now trading within normal conditions, based on technical indicators on the daily chart. 

Medium term outlook

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.