USD/JPY sways as rising Japan machinery orders boost sentiment

on Sep 10, 2020
  • The USD/JPY pair remained in a tight range as investors reacted to Japan's machinery orders.
  • The core orders rose by 6.3% in July after falling by 7.6% in the previous month.
  • However, the orders fell for the eight consecutive month on a year-on-year basis.

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The USD/JPY pair was little changed during the Asian session as traders reacted to machinery order numbers from Japan. The pair is trading at 106.10, which is slightly lower than yesterday’s high of 106.35.

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USD/JPY little changed after better machinery order data

Japan machinery orders rise

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Japan is a leading manufacturer of critical machines that are vital in all sectors of the economy like textiles and food and beverages. According to the Ministry of Finance, the core machinery orders rose by 6.3% in July after falling by 7.3% in the previous month. Analysts polled by Reuters were expecting an increase of 1.9%.

Still, even with the sharp increase, the machinery orders fell by 16.2% on a year-on-year basis. That made it the eight consecutive months that the orders have fallen on an annualised basis this year.

According to the bureau, the total value of machinery orders sold in July rose to ¥1.8 trillion with most of them coming from the private sector. By sector, the best-performing sectors were ceramic, stone and clay products followed by petroleum and coal and shipbuilding. A large decline in pulp and paper, information and communication, and non-ferrous metals offset those gains.

Recent numbers from Japan have shown that the country is making progress at a slower rate than its peers. For example, last month, data showed that the country’s exports and imports declined by 192% and 22.3%, respectively.

Another data showed that inflation is almost non-existent in the country while retail sales have continued to struggle. And this week, numbers showed that household spending fell by 7.6% while the country’s GDP fell by 7.9% in the quarter.

Focus will now shift to the Bank of Japan (BoJ), which will deliver its interest rate decision on Thursday next week. Analysts expect the bank will follow in the footsteps of the Bank of Canadaand the European Central Bank and leave rates unchanged.

USD/JPY technical outlook

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USD/JPY technical chart

The four-hour chart shows that the USD/JPY pair has been moving in a sideways direction recently. It is trading at 106.10, which is along the 50-day and 25-day exponential moving average. The pair is slightly below the 38.2% Fibonacci retracement level. Also, it seems to be forming a symmetrical triangle pattern that is shown in blue. Therefore, the pair is likely to continue in this consolidation pattern because it is not close to this triangle’s tip.

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