Usdjpy drops as Japan’s current account surplus rises, wage growth falters

USDJPY Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.4%	-59.401 Pips
Week to-date	-0.36%	-53.1 Pips
October	2.98%	428.099 Pips

Upcoming key events (London Time)

Wed 07:00 PM USD FOMC Meeting Minutes

What happened lately

In Japan, the current account, non-seasonally adjusted, saw an improvement in August, rising to 3803.6 billion yen from 3193 billion yen in July. This increase indicates a stronger trade surplus and greater financial earnings from overseas, noting favorable economic conditions. However, a slight dampening factor was observed in the country’s labor market, as the Total Labor Cash Earnings over 12 months decreased to 3% in August from 3.6% in July, as reported by the Ministry of Health, Labour and Welfare (MHLW). This decline in earnings suggests potential challenges in wage growth despite the increase in overall economic balance.

These economic developments in Japan are likely to impact the USDJPY exchange rate. The increase in the current account surplus typically exerts upward pressure on the yen, potentially making it stronger. As a result, the USD to JPY exchange rate may experience additional downward pressure, assuming other economic conditions remain unchanged. Hence, the USDJPY rate, which dropped 0.4% to 147.99 on Monday, could continue to reflect this strengthening of the yen if supported by consistent economic data. However, upcoming events such as the release of the FOMC Meeting Minutes from the United States on Wednesday at 07:00 PM could introduce volatility. This high-impact event might provide insights into the Federal Reserve’s future monetary policy moves, influencing investor sentiment and thus USDJPY dynamics. Therefore, traders and investors will be keenly watching the FOMC minutes that could affect the dollar’s strength against the yen.

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What can we expect from USDJPY today?

USDJPY on Monday dropped -0.4% to 147.99. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for USDJPY looks bearish as the pair posted lower in Monday trading session.

Looking ahead for the day, immediate support level is at 147.41 (S1) with break below could see further selling pressure towards 146.83 (S2). To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 148.88 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 147.56 would indicate selling pressure.

For the week to-date, take note that USDJPY is mixed as compared to prior week.

Key levels to watch out: