The Japanese yen is mostly flat today, looking at the currency against its major global peers including the US dollar and the euro. USD/JPY reversed course yesterday after President Trump said he was supportive of a "strong dollar" and believed that the currency would get "stronger and stronger". Trump made his comments on the dollar while speaking at the World Economic Forum in Davos, Switzerland. The euro strengthened following the latest ECB meeting. While ECB President Draghi noted his concern regarding the outlook for inflation, the euro rose nonetheless. Looking at global bond yields, most 10-year yields are trading sideways this morning. The yen tends to strengthen when 10-year government bond yields are falling. Our short-term and medium-term outlook on the yen is bullish.
USD/JPY is currently trading above 109.0. EUR/JPY is currently down and trading above 135.80.
Looking at economic data this week, markets will be watching the BoJ event as well as upcoming inflation figures. On Monday, the Reuters Tankan survey accelerated to an 11-year high (35). The BoJ meeting contained few new surprises. Governor Kuroda emphasized that the status quo was set to continue. Japanese merchandise trade balances fell below estimates (¥86.6b vs. ¥261.7b expected). The leading economic index (108.3 vs. 107.7 expected) was higher than estimates. Cross-border stock (-¥148.2b) and bond (¥411.1b) investments show net inflows into Japan. Later today, we'll see inflation figures. We'll also see the BoJ's minutes. Governor Kuroda is also scheduled to speak at the WEF conference in Davos. Last week, cross-border investments showed continued inflows into Japan.
As the yen strengthens, 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, 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.