Usd strengthens against yen amidst mixed economic signals from Japan and U.S.

USDJPY Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.29%	44.2 Pips
Week to-date	0.45%	69.5 Pips
November	2.22%	337.9 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In Japan, the Ministry of Finance has reported a slowdown in import growth for October, marking a decrease from 2.1% in September to a minimal 0.4%. This suggests a weakening of domestic demand or adjustment in the purchasing of foreign goods. Conversely, exports have picked up, showing a recovery to 3.1% growth from a previous decline of -1.7% in September. This turnaround in export activity indicates improved external demand fortifying Japan’s trade sector. However, these positive developments in export activity were overshadowed by a decline in Japan’s Merchandise Trade Balance Total, which fell to -461.2 billion yen in October, worsening from a -294.3 billion yen balance reported in September. This suggests that the country’s trade deficit has expanded likely due to varying import-export values.

The United States, as per the Census Bureau, saw a slump in the housing sector for October. The number of housing starts decreased to 1.311 million, declining from a revised figure of 1.353 million in September. This significant drop indicates a weakening in the construction sector, reflecting either decreased demand or hesitation among developers. Furthermore, data suggests a sharp decline by 3.1 million in October housing starts compared to the figure of 1.354 million from a year earlier, highlighting a considerable contraction. Additionally, U.S. Building Permits for the same month fell to -0.6 million, deviating from a revised count of 1.425 million in September, illustrating a hesitation in future construction activity and potential slowdowns in housing supply.

Against this backdrop, the USDJPY rose by 0.29% to 155.38. The rise in USDJPY reflects a strengthened U.S. dollar relative to the yen, possibly driven by Japan’s trade balance deterioration and weakened import growth, which may reflect poorly on the yen. Despite improved exports, the growing trade deficit in Japan potentially undermines investor confidence in the yen. Additionally, the lack of supportive economic data from the U.S., especially in the housing sector, did not significantly dent the dollar’s strength. The absence of major economic events may allow existing trends and sentiments to sustain the current currency dynamics. Overall, the mixed economic signals from Japan and the U.S. appear to have slightly favored the dollar over the yen in the forex markets.

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What can we expect from USDJPY today?

USDJPY on Wednesday rose 0.29% to 155.38. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for USDJPY looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 155.98 with break above could target R2 at 156.59. While towards the downside, we are looking at daily low of 154.58 as an important support. Break below this level could weaken the current bullish momentum. A break above 155.89 would suggest bullish bias after recent positive movement.

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

Key levels to watch out: