USD/JPY crawls higher as Japan exports slide for 10 straight months

The USD/JPY pair was little changed during the Asian session as traders reflected on trade and machinery order data from Japan. The pair is trading at 105.45, which is a few pips above the lowest level since July 31^st.

Japan trade still facing challenges

Japan is an export-oriented country, which is well-known for its brands like Toyota, Honda, and Mitsubishi. However, in recent months, the country’s exports have been on a downward trend.

According to the ministry of finance, exports declined by 19.2% to ¥5.3 trillion. In July, the country had exported goods worth more than ¥6.6 trillion. While the 19.2% decline was better than the previous decline of 26.2%, it was also the 20^th consecutive month that exports have fallen.

Similarly, Japan imported fewer goods in July. The imports declined by 22.3% to ¥5.35 trillion. That was the 15^th consecutive month that the imports have fallen. As a result, the country’s trade surplus increased to more than ¥11.6 billion.

The data showed that exports to Asia declined by 8.2% while those to North America fell by 20.7%. Similarly, those to Western Europe declined by 32.5%. At the same time, imports from Asia declined by 13.5% while those from North America and Western Europe fell by 25.2% and 18.0%, respectively.

Unfortunately, the stronger Japanese yen could have dire effects to Japan’s exports. The USD/JPY pair has been in a downward trend after it reached a high of 112 in February this year. A stronger yen is disadvantageous for Japan because it makes its exports more expensive abroad.

Machinery orders fall

The USD/JPY also reacted to Japan’s machinery orders. According to the Cabinet Office, the total value of machinery orders received by the biggest manufacturers in the country fell by 8.4% in June. The core machinery orders, which exclude ships and those from electric power companies, fell by 7.6% in June. That was worse than the 1.7% increase in the previous month.

Sadly, the office expects the orders to decline by 4.8% in the third quarter. Meanwhile, other recent economic numbers from Japan have been relatively strong. For example, manufacturing and services PMIs and retail sales have shown that the country is making some progress.

USD/JPY technical outlook

The USD/JPY pair is trading at 105.60. On the daily chart, the price is slightly above the 61.8% Fibonacci retracement level. It is also slightly below the 50-day and 100-day exponential moving averages (EMAs). Also, yesterday, the pair formed a three black crows pattern. Therefore, I suspect that the pair will continue falling as bears target the next support at 105.00.