The Japanese yen is weakening against most currencies today including the US dollar and the Australian dollar. The yen is mostly flat against the euro and the British pound. After USD/JPY started looking technically oversold on a daily chart yesterday, the pair was due for a short-term rebound. Rising US bond yields and strength in the US dollar is helping the pair recover today. After ending the day yesterday below 110.50, the exchange rate is now above 110.70. Looking at recent economic data, machinery orders were much stronger than expected (4.1% vs. -0.7% expected). As Asian manufacturing growth remains ahead of expectations, the Japanese yen should remain weak. As a safe haven, the yen tends to weaken when the economic outlook is benign. Our medium-term outlook on the yen remains neutral.
USD/JPY is currently trading above 110.70. EUR/JPY is currently up slightly and trading above 135.50.
This is a fairly light week for economic data relating to the yen. The All Industry activity index was ahead of expectations (1.1% vs. 0.4% forecast). Machinery orders were significantly ahead of expectations (4.1% vs. -0.7% expected). On Thursday we'll see cross stock and bond investments. Last week, cross-border investments continue to show net inflows into the yen.
As the yen strengthens thanks to changes in the Bank of Japan's policies, we are upgrading the yen to bullish in the short-term. Note that the currency is currently looking overbought, based on technical indicators on the daily chart.
As the yen strengthens on weak inflation data, we are upgrading the yen to neutral. 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.