After weakening on Friday, the Japanese yen is mostly flat today. Looking at USD/JPY, while the pair was up this morning (indicating yen weakness), USD/JPY is currently flat. Inflation expectations are weaker this morning following US political news over the weekend. As we wrote in our US dollar daily update, Republican Senator Susan Collins is undecided regarding the current tax bill. While she voted for the draft Senate tax bill, she has express doubts relating regarding the current version that is being negotiated between the House and the Senate. The US dollar is broadly selling off as a result. Despite today's yen bounce, our medium-term outlook remains bearish. We will also consider downgrading our short-term outlook to bearish if current trends continue.
USD/JPY is currently trading just above 113.40. Looking at the euro vs. the yen, EUR/JPY is up and is currently trading above 133.70.
This is a fairly light week for economic data releases relating to the yen. On Tuesday, we’ll see the Corporate Goods price index and the tertiary industry index. On Wednesday we’ll see machinery orders. On Thursday we’ll see cross-border stock and bond investments. We’ll also see Nikkei manufacturing PMIs and industry production. Finally on Friday we’ll get a series of Tankan surveys. Last week, GDP growth beat expectations.
As the yen weakens as inflation expectations rise, we are downgrading the yen to bearish in the short-term. Note that the currency is trading within normal conditions, based on technical indicators on the daily chart.
As the yen sells off on hopes for US tax cuts, we are downgrading the yen to bearish. 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.