Booking Profit on USD/JPY After a 20 Pip Surge
Today the volatility was subdued for the most part, with the range in most pairs being narrow, apart from USD/JPY which surged 200 pips from yesterday’s lows, as traders remain cautious until the US report gets released tomorrow. The price action has been generally muted, but USD/JPY got a boost from the economic data from Japan, which missed expectations early this morning.
The dollar has been climbing higher slowly against other major currencies, as did bond rates, with 10-year yields remaining slightly above 4% for now. This helped to push the USD higher earlier, particularly against risk currencies such as commodity dollars. However, nothing is running away with anything, as we all await the inflation data tomorrow before getting started, apart from the JPY which is crashing lower today after the wages numbers.
USD/JPY was in focus earlier today after the November earnings report from Japan which was released early this morning, showed another major decline last month, potentially derailing plans for the Bank of Japan to begin tightening the monetary policy later this year. Labour cash earnings rose just +0.2% year-over-year compared to 1.5% expected while real wages fell 3.0% on an annualized basis.
Japan November Labour Average Cash Earnings Report
- Labour November Cash Earnings YoY +0.2% vs +1.5%
- October Cash Earnings were +1.5%
- Overtime Pay YoY + 0.9%
- Prior overtime pay was -0.1%
- Inflation adjusted, i.e. real, wages YoY -3.0%
The BOJ has consistently stated that it wants wages higher in order to increase household spending power, demand, and ultimately demand-pull inflation, but that’s not happening. They are waiting for the Spring pay discussions to offer the necessary wage increase. Such fiuigures are certainly disheartening, but there may be a boomerang effect coming up. People don’t really like real pay declinings, thus the softer numbers we have seen in the last year may just put additional upward pressure on wage talks during this year.
USD/JPY Live Chart
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