The yen is stronger this morning, particularly against the US dollar. The yen has been quite choppy in recent days. The currency fell sharply last Friday and then regained most of its losses on Monday. In the short-term the yen is mostly likely to gain against the US dollar as significant doubts remain regarding the US Senate tax vote. US bond yields have also been very weak, in a sign that tax questions are plaguing the bond market as well. Our short-term outlook on the currency remains bullish.
USD/JPY is currently trading just above 112.0. Looking at the euro vs. the yen, EUR/JPY is flat and is currently trading below 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.