The Japanese yen is broadly weaker today. The yen is currently the weakest against the Australian dollar and the US dollar. While the yen was higher against the euro earlier in the day, the pair has weakened following recent comments from ECB President Draghi. Looking at recent trading in the yen, while the yen initially weakened following US inflation figures announced yesterday, the currency has since made back most of its losses. While rising US inflation typically results in sustained yen weakness (as interest rate differentials increase), the yen remains in a firmly bullish trend.
Turning to economic data, machinery orders were surprisingly strong and beat consensus estimates. While most economic data has disappointed in early 2018, rising machinery orders suggests a positive outlook for Japan's industrial economy. In other news, Prime Minister Abe said that recently disclosed documents show that there is no involvement between himself or his wife in the school land deal. Abe's wife (Akie) was implicated in a possible corruption scandal involving below market value state-owned land earlier this week. Abe's announcement had a limited impact on the currency. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 106.60. EUR/JPY is currently up and trading above 131.90.
Looking at Japanese economic data this week, we'll see the BoJ's minutes and machinery orders. The MoM tertiary industry index (-0.6% vs. -0.2% expected) was below consensus expectations. The BoJ's meeting minutes suggest that the Bank remains on hold. YoY machinery orders (2.9% vs. 0.6% expected) were significantly ahead of expectations. Tomorrow, we'll see cross-border stock and bond flows. On Friday, we'll see industrial production and capacity utilization. Last week, sentiment surveys pointed to decelerating growth while the Bank of Japan maintained the status quo.
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.