USD/JPY: Trump improvement and better Japan services PMI drags yen

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 5, 2020
  • The USD/JPY pair rose as investors reacted to Trump health and Japan services PMI data.
  • Data from Japan showed that the services PMI made some improvements in September.
  • On Sunday, health officials confirmed that Trump was showing signs of improvement.

The USD/JPY is up by 0.20% as investors react to news that Donald Trump is improving. The PMI is also reacting to the relatively strong services PMI data from Japan. It is trading at 105.54, which is significantly higher than the intraday low of 105.30.

USD/JPY rises

Trump showing signs of improvement

The Japanese yen is often viewed as a safe-haven currency. This means that the currency tends to rise whenever significant risks emerge. It derives this role because of the strength of the Japanese economy and the country’s significant assets abroad. For example, Japan is the biggest holder of American debt.

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Therefore, the currency rose sharply on Friday after Donald Trump revealed that he had the Covid-19 illness. Investors were worried about his illness and the implications it would have ahead of the general election. Global equities also pulled back.

On Sunday, health officials at the Walter Reed Military Hospital revealed that the president was doing well and that he could be released today. The president also took a drive to meet with some of his supporters. As a result, the Japanese yen has dropped while global stocks have rallied, with Dow Jones and S&P 500 futures rising by almost 1%.

Japan services PMI improved

The USD/JPY is also reacting to Japan’s services PMI data. According to Markit and au jibun bank, the country’s services PMI increased slightly in September as the country continued to reopen. The PMI came in at 46.9, which was a few points above the previous month’s 45.0.Still, with the index being below 50, it means that the sector is still contracting.

The data showed that incoming new business received by service providers declined for the eighth consecutive month in September. Also, the slowdown in international travel and tourism impacted export sales while employment continued to fall. In addition, the average input costs declined for the second consecutive month while businesses remained optimistic about the future of the country.

The services sector plays an important role in Japan, employing millions of people. The data came a few days after data showed that the Japan manufacturing PMI had climbed to a seven-month high of 47.7. In a statement, Shreeya Patel of Markit said:

“Japan continues to be impacted by the COVID-19 outbreak as it recorded another contraction in services business activity during September. Demand across the country remains subdued, with tourism and travel restrictions impeding new work volumes across the service sector.”

USD/JPY technical outlook

USD/JPY
USD/JPY technical chart

The four-hour chart shows that the USD/JPY pair has risen today. It has moved above the 25-day exponential moving average. Also, the price is slightly below the descending trendline that is shown in green. It has also re-entered the previous triangle pattern. Therefore, the pair remains in a bearish trend so long as it is under the descending trendline. However, a move above this line will send a signal that there are still buyers in the market, who will want to push the price to the next resistance level at 106.0.

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