USD/JPY Consolidates Above 156 after Weak Japanese Data
For a month the JPY to USD exchange rate has experienced significant volatility, marked by sharp declines followed by strong buying activity
For a month the JPY to USD exchange rate has experienced significant volatility, marked by sharp declines followed by strong buying activity. Despite this volatility, the overall bullish trend persists, driven by economic indicators from Japan signaling a weakening economy, such as the ones we have seen this week.
The exchange rate has surpassed 156 again after diving nearly 11 cents lower, indicating continued strength in the USD against the JPY. On Monday, the Tertiary Industry Activity report revealed an unexpected -2.4% decline for April, highlighting the challenges facing the Japanese economy. This negative data adds to the momentum of the USD/JPY bullish trend as it underscores the economic struggles Japan is facing.
Today, JPY traders were awaiting the release of Core Machinery Orders and the Trade Balance data. These reports are important as they provide further insight into Japan’s economic health, with a continued decline in these indicators, reinforcing the current bullish trend for the USD/JPY pair.
USD/JPY Chart H4 – MAs Continue to Hold As Support
The BOJ’s intervention in early May had a significant impact on the USD/JPY exchange rate, pushing it nearly 11 cents lower to around 151. However, buyers quickly re-entered the market, driving the pair back above 156. This pattern of intervention followed by rapid reversal underscores the challenges the BOJ faces in managing the yen’s value. Here is an analysis of the support and resistance levels and the implications of moving averages:
Support Levels:
- 154 Level: Recent declines have found robust support below the 154 mark. This indicates strong buying interest at lower prices, suggesting that the market sees value in the yen when it approaches this level.
- 151 Level: The level reached following the BOJ’s intervention serves as a crucial support level. If the pair were to drop again, buyers might be expected to step in around this point.
Resistance Levels:
- 156.80 Level: This previous high is a key resistance level. A break above this could signal further upward momentum.
- 160 Mark: If the pair surpasses the 156.80 resistance, the next target would likely be the 160 mark, a psychological and technical resistance level.
Japan Trade Balance and Core Machinery Orders
- April Exports YoY: Increased by 8.3%, which is below the expected 11.1%. This suggests a slower growth in exports than anticipated.
- April Imports YoY: Rose by 8.3%, slightly below the expected 9.0%, indicating a modest slowdown in import growth.
- March Machinery Orders MoM: Surprised positively with a rise of 2.9%, significantly better than the expected decline of 2.1%. This indicates a rebound in domestic business investment.
The Reuters Tankan Survey, a Key Indicator for the BoJ’s Q2 Tankan Survey
- Manufacturers’ Sentiment: The index remained unchanged at +9 in May, indicating steady but subdued confidence among manufacturers.
- Non-Manufacturers’ Sentiment: The index improved slightly to +26 in May from +25 in April, reflecting a modest increase in optimism among service sector firms.
- Future Expectations: The manufacturers’ index is expected to rise to +11 by August, while the non-manufacturers’ index is anticipated to slightly decrease to +23.
USD/JPY Live Chart
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