JPY news - page 26
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Japan Final October Industrial Production: 0.0% m/m (preliminary was +0.1%)
Final October Industrial Production data
Also at the same time ... Capacity Utilisation:
Japan - Nikkei Manufacturing PMI (Dec., flash): (prior 51.3)
Nikkei Manufacturing PMI
USD/JPY Extends Wednesday’s Advance
USD/JPY moved sharply higher following the announcement of a 25 basis point rate increase by the Federal Reserve in yesterday’s trading and those gains have been built upon since, with the pair currently trading at 118.47, up more than 1% over Wednesday’s North American close.
As a result of the move higher in USD/JPY, the pair has broken above resistance at Monday’s 116.124 high, which represented a test of the low established in January of this year at 115.974. The decisive break above this resistance is a significant bullish technical development for USD/JPY, given the numerous corrective bottoms that have halted near this area, as can be seen on the weekly chart. The next area of resistance does not come into play until the late January 2016 corrective top at 121.689. This is the next target for the pair.
However, should sellers step in and drive USD/JPY lower in reaction to the persistent overbought condition, first support is at Monday’s 116.124 high. Maintaining above this level would keep the bias for the pair firmly to the upside.
In today’s news, a preliminary measure of Japan’s manufacturing sector improved faster than expected in December, signaling increased momentum in the country’s factory sector. The Markit/Nikkei flash manufacturing purchasing managers’ index (PMI) came in at 51.9 in December, up from a final reading of 51.3 in November. The reading was higher than the median forecast, which called for 51.5. It was also the fastest acceleration in manufacturing conditions since January.
On today’s calendar in the US, CPI, initial claims and the Philadelphia Fed are due to be released, followed by Housing Starts/Building Permits on Friday.
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USD/JPY forecast for the week of December 19, 2016
The USD/JPY pair rallied during the course of the week, as we sliced through the 115 handle. The 115 handle had been rather resistive, and the fact that we are broken above here it’s likely that we will continue to go higher. However, this market is overextended so it’s likely that we need a pullback in order to pick up momentum. The 110 level below is even more supportive, so at this point in time unless you are already long of this pair, you are best rewarded by waiting for value if and when it finally shows up.
Japan - Trade Balance (November): Y 152.5bn (expected Y 227.4bn)
Japan - Trade Balance (November): Y 152.5bn (expected Y 227.4bn)
Japanese Merchandise Trade Surplus Narrows in November; Exports Decline Only 0.4%
Japan’s trade surplus narrowed in November, as imports fell at a slower rate and exports nearly broke even.
The Ministry of Finance reported a merchandise trade surplus of ¥152.5 in November, after posting a ¥496.2 billion surplus the previous month. A median estimate of economists called for a surplus of ¥227.4 billion.
Japan’s exports declined just 0.4% in the 12 months through November. Overseas shipments declined 10.3% year-over-year in October. A median estimate of economists anticipated a 2% shortfall.
Imports fell at an annualized 8.8%, better than forecasts calling for a 12.6% drop. They were down 16.5% year-over-year in September.
In seasonally adjusted terms, Japan’s surplus expanded to ¥536.1 billion in November, official data showed.
Japanese exports have now declined for 14 consecutive months, underscoring weak demand in the international market. The world economy is expected to grow just 3.1% this year and pick up to 3.4% in 2017, according to the International Monetary Fund. Soft demand in advanced markets will likely generate additional headwinds for Japanese manufacturers.
While the global economy is anything buy smooth sailing, the dramatic drop in the value of the yen since Donald Trump’s presidential election victory could help boost Japan’s export performance. The yen has declined more than 12% against the US dollar since the November 8 election.
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Bank of Japan (BoJ) Preview: Global Forces Remove Easing Pressure
The strong dollar will raise inflation forecasts and should remove the potential for further Bank of Japan monetary easing. Higher US yields will also make it increasingly difficult to sustain long-term Japanese rates near zero. The most likely outcome is that monetary policy will be left on hold, but there is the potential for a less dovish statement and hints over greater policy flexibility, which should curb potential yen selling.
Seven weeks is a long time in the life of a central bank. The Bank of Japan faces a very different set of conditions than those seen at its previous policy meeting at the beginning of November.
At that meeting, USD/JPY was trading around 104.00 amid underlying selling pressure, while US 10-year yields were trading around 1.80% as markets pondered an expected US Presidential election victory by Democrat candidate Clinton.
In the event, Republican candidate Trump pulled-off an upset election victory in the Electoral College vote and, despite a very brief dollar slump, the US currency has surged over the past six weeks. USD/JPY has surged to highs around 118.50 before encountering some profit taking, while US benchmark 10-year yields have increased to a peak above 2.60%, the highest level for two years.
As expected, the Federal Reserve also increased interest rates by 0.25% to 0.50-0.75% at the latest policy meeting. Under the new yield curve control (YCC) programme, the bank is aiming to keep long-term interest rates close to zero. The increase in US yields over the past few weeks has increased the impact of the YCC policy given that there has been a widening of yield spreads on dollars over the yen, which has undermined the Japanese currency.
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USD/JPY: Dips A Buy Targeting 121 In 1-Month
The JPY has weakened sharply since November when Trump was elected as the next US president. The move higher in USD/JPY has among others been driven by risk appetite, higher yields on 10Y US treasuries and a higher oil price. According to the IMM data, investors appear to have turned around their positioning and are now short the JPY for the first time since the beginning of 2016.
We have lifted our USD/JPY targets as we expect the JPY to continue to suffer in an environment with rising global bond yields and a higher oil price.
We target USD/JPY at 121 in 1M and 119 in 3M.
Longer term, we expect USD/JPY to stabilise targeting 118 in 6-12M as we expect portfolio outflows out of Japan to counter the underlying appreciation pressure in the JPY stemming from fundamentals.
BOJ Rate Decision: Bank of Japan Keeps Policy on Hold in Final Meeting of Year
The Bank of Japan (BOJ) kept monetary policy on hold Tuesday, as officials continued to track a slow-moving economy that has shown only modest progress since the Bank adopted a new policy framework in September.
In a 7-2 vote, the BOJ voted to keep interest rates at -0.1%, where they’ve stood since the start of the year. A median estimate of analysts called for no change.
Policymakers also voted to maintain the purchase of Japanese government bonds so that the 10-year JGB yield remain at zero percent. The Bank will also continue to increase ETF purchases at an annual rate of ¥6 trillion.
The BOJ has remained on the sidelines of monetary policy since uprooting their program in September after years of failed stimulus efforts. The new program centres on rate targeting as opposed to quantitative easing.
Japanese consumer prices rose in October for the first time in nine months, although the underlying trend remained extremely weak, with core inflation resuming its descent. The national consumer price index tricked up 0.1% year-over-year in October, following a 0.5% decline the previous month.
Core inflation fell 0.4% year-over-year. Core-core inflation, which strips away both food and energy, edged up 0.2% in the 12 months through October.
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