The JPY continued to edge weaker against even a struggling US dollar as trade data overnight failed to support the currency. Exports failed to grow as much as expected relative to a year ago, though they were still up 11.5 percent from the previous year.
Of course, in the course of that year, the trade-weighted Japanese Yen fell by some 20 percent, so the growth isn’t that impressive if those exports are billed in foreign currency. USDJPY is running out of room to shrink the range any further soon, and must at least make a false breakout one way or another in coming days.
Chart: USDJPY
It's a question of waiting and wondering in USDJPY as the ever-shrinking range can hardly shrink any further in the near-term. To the upside lies the 99.00 area high of last week, though the Ichimoku cloud daily comes in just below that level. And to the downside, the 96.55 level which was close to the 200-day moving average at the time it traded, though that average has since moved up over 97.00.
Looking ahead
The Non-farm payrolls and unemployment rate for September are up tomorrow, a data point that should have been released October 4. It’s hard to see the US dollar running away to the downside until at least the other side of this data point, if it's going to continue weaken further. Is a bit of consolidation for the US dollar on the cards today then? Elsewhere, the greenback looks fairly firm against the kiwi and the loonie, though it’s not exactly putting on a fireworks show.
For the USD to make a convincing sign in the near-term that the new bout of selling late last week was just a kneejerk to the shutdown deal, we would need to see EURUSD collapse back below 1.3550 and similar developments in other major USD crosses.
Until then, the story will persist (barring spectacularly strong US data) that the ongoing uncertainty over the US government’s ability to avoid another shutdown will keep the US Federal Reserve on a taper delay until at least January and that this latest episode has tarnished the reputation of the US currency in the eyes of the large currency reserves managers.
In that environment, the greenback will only appreciate on signs that European Central Bank president Mario Draghi is about to reach into the monetary policy toolbox again or if we see a broader loss of confidence in risk assets, as I still think the dollar will trade like a safe haven.
Economic Data Highlights
- Japan Sep. Trade Balance Adjusted out at -¥1,091.3B vs. -¥1,127.4B expected and -¥820.8B in Aug.
- New Zealand Sep. Credit Card Spending rose +5.2% YoY vs. +6.6% in Aug.
- Italy Aug. Industrial Orders/Sales (0800)
- UK Bank of England’s Taylor to Speak (1230)
- US Sep. Existing Home Sales (1400)
- US Weekly DoE Crude Oil and Product Inventories (1430)