The yen strengthened sharply yesterday, and is flat this morning. US bond yields fell yesterday after FOMC minutes suggested that the outlook for global inflation was at risk. Durable goods and initial jobless claims were also worse than expected. Given the yen's sensitivity to relative interest rates, the yen strengthened as a result. In the short-term, the yen is looking overbought but the yen can keep strengthening in the medium-term. Given the risk of the upcoming US senate tax vote, the yen can keep rising. Our outlook on the currency remains bullish.
USD/JPY is currently trading just above 111.20. Looking at the euro vs. the yen, EUR/JPY is up slightly and is currently trading above 131.75.
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.