USD/JPY turns lower after better Japan machinery order numbers

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at He lives in Nairobi with his wife, son,… read more.
on Oct 12, 2020
  • The USD/JPY is down for the second straight day as traders react to Japan's machinery order numbers.
  • The data showed that the core orders rose by 0.2% in August, better than the expected decline of 1%.
  • However, Japan's producer price index data disappointed.

The USD/JPY price is down for the second straight day as investors react to the Japanese producer price index (PPI) and machinery orders. It is trading at 105.50, which is slightly below last week’s high of 106.10.

USD/JPY drops after better machinery orders

Japan machinery orders

Japan is one of the biggest industrial countries in the world. It is known for its large manufacturing industry that produces some of the best machineries in the world. Therefore, the market pay close attention to the trend in the country’s machinery orders.

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Data from the Cabinet Office showed that machinery orders from 280 big manufacturers increased by 19.8% in August from July. That was a significant improvement from the previous month’s increase of 7% and the prior month’s decline of 8.4%.

The closely-watched core machinery orders that excludes the volatile machines like ships increased by 0.2% on a MoM basis. They fell by 15.2% on an annualised basis. Analysts polled by Reuters were expecting the orders to fall by 15.6%.

These numbers show that the Japanese economy is making a slow recovery even as risks persist. For example, early this month, data showed that the Japanese manufacturing PMI remained below 50, which is a sign that manufacturers have a long way to go in the recovery phase.

Meanwhile, the USD/JPY also reacted to the producer price index (PPI) data. This number measures the change in prices of goods sold at the factory gate and is an important measure of inflation. The PPI declined by 0.2% in September from August. That was lower than the previous month’s increase of 0.1% and the consensus estimates of 0.2%. On an annualised basis, the PPI fell by 0.8%. These PPI numbers mean that the country has a longer distance to go until the prices reach the BOJ target of 2%.

At the same time, the export price index rose by 0.3% while the import price index rose by 0.4%.

USD/JPY technical outlook

USD/JPY technical chart

The four-hour chart shows that the USD/JPY pair reached a weekly high of 106.10 on October 8. The price is below the 25-day and 15-day exponential moving averages. It has also moved below the classic pivot point. Also, it is above the pink ascending trendline that connects the lowest points in September and October. Therefore, I suspect that the pair will continue falling as bears aim for this trendline and the previous pivot point at 105.36.

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