USD/JPY Fundamental Daily Forecast – Divergence with Yields May Mean Bottom is Near

James Hyerczyk
·3 min read

The Dollar/Yen is trading nearly flat early Tuesday following a steep sell-off the previous session. Technically, the main trend changed to down with prices hitting their lowest level since March 5.

It was a strange day on Monday with U.S. Treasury yields rising slightly as investors continued to monitor corporate earnings and the progress of the economic opening and the U.S. Dollar dropping sharply.

The yield on the benchmark 10-year Treasury note gained 4 basis points to 1.61%. The yield on the 30-year Treasury bond was also higher at 2.29%.

There were no major U.S. economic data releases due out on Monday, which may have contributed to the wicked selling pressure.

At 03:49 GMT, the USD/JPY is trading 108.110, down 0.027 or -0.02%.

Japan Logs Trade Surplus of $6.1 Billion in March

Japan logged a trade surplus of 663.7 billion Yen (about $6.1 billion) in March as exports also posted the most robust surge in over three years, said the government data released early Monday.

The trade surplus figure is higher than recorded in March 2020 and three times more than registered in February, the Finance Ministry said in preliminary data.

The figures signal the global economy continues to recover from the last year’s slump due to the coronavirus pandemic that had put brakes on the economic activities across the world.

The ministry said the Japanese exports increased by 16.1 percent year-on-year to 7.4 trillion Yen. It is the biggest expansion since November 2017, when exports registered a growth of 16.2 percent.

Japan’s exports had declined by 4.5 percent year-on-year in February this year to 6.04 trillion Yen.

Imports increased by 5.7 percent to 6.7 trillion Yen, according to the data.

Surplus Trade Logged with China

Japan registered a surplus trade of 57.5 billion Yen with China as shipments to its largest partner soared 37.2 percent in the year to March. This is in contrast to the negative trade balance a year earlier.

Surplus Registered with United States

With the U.S., Japan logged a growth of 44.9 billion Yen, which is 2.1 percent more year-on-year, amid solid demand for cars and construction machinery.

Deficit Widens with European Union

With the EU, its third trading partner, Japan widened its deficit by 123.4 percent to 84.2 billion Yen.

Japan April Manufacturing PMI Returns to Expansion but Export Orders, Output Still Falling

Daily Forecast

The USD/JPY is now down 14 sessions from its March 31 multi-month high. The down trend is strong, but some technical traders may view the Forex pair as oversold.

There is a slight divergence forming between June 10-year Treasury note futures and the Japanese Yen. June 10-year Treasurys hit their highest level since March 11 and have now posted a sideways to lower trade the last three sessions, meaning yields are moving up slightly. Despite the move in the Treasurys, the USD/JPY has continued to move lower.

We’re going to be watching this relationship to see if it leads to a short-term bottom in the Dollar/Yen.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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