Japanese economic trade shifts and USDJPY rate increase

USDJPY Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.5%	77.8 Pips
Week to-date	0.09%	13.4 Pips
January	-0.35%	-55.499 Pips

Upcoming key events (London Time)

Fri 03:00 AM JPY Bank of Japan Short-Term Policy Interest Rate

What happened lately

Japan’s economic data for December reflects some notable changes in its trade activities. The country’s 12-month export rate for December declined to 2.8% from 3.8% in November. Conversely, imports saw a significant turnaround, with the 12-month import rate increasing to 1.8% in December compared to a -3.8% in November. This change signals a rise in domestic demand or global supply chain improvements. The adjustments in trade flows are also reflected in the Merchandise Trade Balance, which improved drastically to 130.9 billion yen from a deficit of -117.6 billion yen in November, indicating a healthier trade position for Japan.

The movements in Japan’s trade figures can impact the USDJPY currency pair. A decrease in export growth coupled with an increase in imports typically suggests a weakening in the demand for the yen, as Japan would be buying more foreign goods than it is selling. However, the improvement in the trade balance suggests that overall trade is becoming more favorable for Japan, which could lend some strength back to the yen. The mixed signals provided by these figures might lead to a cautious approach by traders and investors when evaluating the yen’s performance against the dollar.

Meanwhile, the USDJPY rate’s rise by 0.5% to 156.43 could suggest that current market forces are leaning towards a stronger dollar, perhaps driven by the anticipation of potential policy changes by the Bank of Japan. The upcoming Bank of Japan’s short-term policy interest rate announcement could prove influential. Should the BoJ signal any changes in monetary policy, it may lead to volatility in the exchange rate, potentially heightening yen investors’ reactions. Until any decisive economic policy news emerges, the mixed trade figures and external economic factors could continue to impact USDJPY movements.

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What can we expect from USDJPY today?

USDJPY on Wednesday rose 0.5% to 156.43. Price is above 9-Day EMA while Stochastic is rising.

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 156.98 with break above could target R2 at 157.52. While towards the downside, we are looking at daily low of 155.35 as an important support. Break below this level could weaken the current bullish momentum. A break above 156.71 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: