The yen is flat this morning after weakening yesterday. Despite weakness in the euro yesterday, EUR/JPY ended the day flat and the pair continues to be flat today. The yen sold off against the US dollar yesterday. As the currency looks overbought in the short-term, the yen is susceptible to sell offs. Looking at bond yields, the yen weakened yesterday while US interest rates were flat. Current 10-year US government bond rates are 2.36%. Yesterday we wrote that the yen was likely to gain thanks to political concerns engulfing both the euro and the dollar. Instead, only the dollar appears to be moving higher.
USD/JPY is currently trading above 112.50. Looking at the euro vs. the yen, EUR/JPY is flat and is currently trading above 132.0.
This is a fairly light week for economic data releases relating to the yen. Trade balance data missed estimates. The trade balance was less than forecast (285b vs. 330b expected) while both exports (14% vs. 15.8%) and imports (18.9% vs. 20.2%) missed estimates. The All Industry Activity Index also missed estimates (-0.5% vs. -0.4% expected). On Friday we’ll see cross-border stock and bond investments. Last week, GDP growth figures met expectations.
As the yen strengthens in relative terms against major currencies, we are upgrading the yen to bullish in the short-term. Note that the currency is looking overbought in the short-term, based on technical indicators on the daily chart.
As political developments overseas strengthen the yen, we are upgrading the yen to bullish. Looking at the yen on a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators when looking at a weekly chart.