USD/JPY continues to trade sideways and looks like it may drift right into the weekend. In the European session, USD/JPY is trading just above the 124 line.
Japanese data mixed
Japan released a data dump on Friday, but the yen wasn’t biting and has shown little change. Consumer Confidence slowed for a third straight month in March, dropping from 35.2 to 32.8. To a large extent, the decline can be attributed to strict Covid restrictions, which were in place for most of March and weighed on consumers’ moods. The outlook is a bleak one for consumers, as real incomes have stagnated due to Covid curbs and higher prices. This has led consumers to cut down on spending, which is bad news for the economy.
There was better news from Japan’s Current Account, which jumped in February to JPY 0.52 trillion, up from JPY 0.18 trillion a month earlier. Japanese exports are booming, with timely assistance from the weak Japanese yen, which flirted with the 125 line last week. However, this data precedes the Ukraine war, which has triggered soaring commodity prices and made imports into Japan more expensive. This will likely have a negative impact on the next Current Account release.
BoJ Governor Kuroda has said that he supports a weak yen, but apparently not “too weak a yen”. The central bank intervened last week after the yen fell sharply, with Kuroda expressing concerns about rapid moves in the exchange rate. The yen subsequently recovered but has once again resumed its downward movement. I expect USD/JPY to retest 125 shortly, but when that happens, traders should be prepared for Kuroda to again make statements designed to curb the yen’s decline. US Treasury yields continue to move higher, and the widening US/Japan rate differential will continue to weigh on the yen.
USD/JPY Technical
- USD/JPY has support at 121.25 and 119.16
- 123.25 is under pressure resistance. Above there is resistance at 124.67