The Japanese yen is once again higher today. The currency is the strongest against commodity currencies including the Australian dollar and the Canadian dollar. The yen continues to benefit from rising fears and has strengthened for the last four trading sessions in a row. The yen's ascent began after the Bank of Japan shocked markets by stating its intentions to exit monetary stimulus by 2019. The yen strengthened further after President Trump announced tariffs on imported steel and aluminum. While fears of global trade wars remain, recent Italian elections are worsening sentiment even further. Euroskeptic parties, including the M5S, performed much better than projections. As political risks re-surface in the world's largest economic region, riskier assets such as equities are selling off while safe havens (such as the Japanese yen) are gaining. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 105.50. EUR/JPY is currently down and trading above 129.920.
Looking at Japanese economic data this week, we'll see Q4 GDP figures and hear from the Bank of Japan. Markit services PMIs missed expectations (51.7 vs. 52 expected). On Wednesday, we'll see the leading economic index. On Thursday, the most important day, we'll see cross-border stock and bond investments. More importantly, we'll see Q4 GDP growth figures. We'll also see the trade balance and the Eco-Watchers survey. On Friday, we'll see inflation for January. Governor Kuroda will deliver his monetary policy statement at the upcoming BoJ meeting. No changes to interest rates are expected. Last week, manufacturing PMIs remained healthy while industrial production contracted.
As the yen strengthens, we are upgrading the yen to bullish in the short-term. Note that the currency is trading within a normal range, 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.