Market Analysis – USDJPY
The US Dollar is declining against the Japanese Yen in this morning’s session, developing a fairly strong “bearish” trend and renewing local lows since the 24th March. It is yet to be known whether the movement will remain in place in the short or long term. The US Dollar expects the emergence of new drivers in the market, but for now it remains under the pressure of the declining yields of Treasury bonds. The declining treasury yields and strong performing stock market has lowered the demand of the US Dollar in the previous 2 weeks.
It should be noted that the price movement of the USDJPY currently sits at a significant price level known as a “flipped support level”. The level may develop a major sentiment level in traders as it has marked a pivot price since early March 2021. Currently, we are witnessing the sixth consecutive bearish trading day as the price hovers far from the 30 day average pricing, due to this, traders are contemplating whether the exchange rate may be oversold.
The Japanese Yen is getting some support after the release of macroeconomic statistics from Japan this morning, though the movement is also largely linked to the US Dollar. Japanese exports went up by 16.1% YoY in March after the decline by 4.5% YoY in the previous month. Analysts had expected growth by 11.6% YoY only. Imports for the same period rose by 5.7% YoY, which turned out to be better than projected by 1.0%, but noticeably weaker than the dynamics of the previous month at the level of 11.8% YoY. Merchandise Trade Balance Total in March increased from JPY 215.9B to JPY 663.7B.
Moving away from the economical aspects and concentrating on the political picture, the focus still remains on the expansion of the new wave of the pandemic in Japan. Yesterday, Minister of Economy, Yasutoshi Nishimura, announced the likelihood of spreading emergency measures to four more prefectures and bringing the total number of quarantined regions to ten. This intention casts doubt on the possibility of hosting the Olympic Games in the capital Tokyo, which is also experiencing a significant outbreak of the disease. Against this backdrop, Prime Minister Yoshihide Suga asked Pfizer for additional vaccine supplies. Also today, the Governor of the Bank of Japan, Haruhiko Kuroda, said that there was still an opportunity to reach the inflation target of 2.0%, but this would take time.
On Friday, data from the US construction market figures were positive, but could not provide enough support for the US Dollar to strengthen. The number of building permits issued increased from 1.720M to 1.766M, and the number of houses, the construction of which began in the reporting month, increased from 1.457M to 1.739M. This data indicates that the construction market began to recover following the world of work after the launch of the financial incentive package. Also, Pfizer’s management believes that citizens may need annual coronavirus vaccinations to prevent a new pandemic, though this has not been fully confirmed or proven.
When looking at the movement of the US Dollar in general the picture does not improve. The price movement of the US Dollar Index remains negative today as the price drops to 91.40 once more updating price lows. The currency indexes can assist traders to determine a stronger price movement on currency pairs. In turn, the Japanese Yen index has formed a bullish candlestick today. Traders are following the price movement closely as the price has not yet passed the previous prices of collapse. Therefore, traders are contemplating whether the price will find resistance soon or whether the price will break above the resistance level.