USD/JPY was unchanged last week, and the lack of movement has continued in the Monday session. In North American trade, USD/JPY is trading at 104.70. up 0.08% on the day.
Japan Manufacturing PMI improves
Japan’s manufacturing sector has been mired in contraction territory since May 2019, pointing to ongoing weakness. However, the rate of decline eased in September, as the Manufacturing PMI rose to 48.7, up from 47.7 beforehand. This was above the forecast of 48.0 points. Jubin Bank reported that foreign demand for Japanese goods rose for the first time since 2018, as global economic conditions have been slowly improving.
Investors eye BoJ Minutes
The Bank of Japan releases the minutes of its September meeting on Tuesday. The central bank has held the course with interest rates and emergency funding facilities and continues to maintain an ultra-accomodative monetary policy. On Thursday, BoJ Governor Kuroda warned that Japan’s economy is surrounded by “a high degree of uncertainty and has significant downside risks”. The BoJ has revised downwards its growth forecast for the year ending March to -5.5%; in August, the forecast stood at -4.7 per cent. The minutes will provide a glimpse into the BoJ’s view of the health of the economy; a dovish take could sour investors and send the yen to lower levels.
In the US, the manufacturing sector continues to show expansion. The ISM Manufacturing PMI accelerated to 59.3 in October, a strong improvement from the previous release of 55.4 points. This was the strongest reading in 11 months, and is another sign that the US economy continues to gain traction. Recent US numbers have looked strong, notably a GDP of 33.2% in the third quarter. However, the positive numbers may be a case of too little, too late for President Trump, who continues to trail Democrat Joe Biden in the polls. Still, it’s prudent to keep in mind that polls don’t vote at the ballot box, and Trump could yet pull out another stunning election victory. Given that both the US dollar and the Japanese yen are safe-havens, USD/JPY could have a muted response to the US election.
USD/JPY Technical Analysis
- 104.90 was tested in resistance in the Asian session and is a weak line. This is followed by resistance at 105.12
- 104.29 is providing support, followed by support at 103.90
- USD/JPY has crossed above the 10-day MA, which is a sign of an upswing
