USD/JPY forms head and shoulders as exports fall for 22 straight months
- The USD/JPY is little changed today as traders react to Japan exports and imports numbers.
- The country's exports declined by 4.9% while imports fell by 17.2%.
- As a result, the trade surplus increased to ¥675 billion from the previous ¥248 billion.
The USD/JPY price is little changed as the market reacts to the latest Japanese trade numbers. The pair is trading at 105.25, which is close to its Friday’s close of 105.35.
Japan trade numbers improves
Japan exports and imports continued to fall as the country’s economy continued to recover. According to the Ministry of Finance, the country’s exports declined by 4.9% to ¥6.05 trillion. This decline was worse than the 2.9% that economists were expecting. Still, it was better than August’s decline of 14.8%. It was also the best figure the country has recorded in seven months.
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However, Japan’s exports have declined for the past 22 consecutive months. This decline has been because of less vehicle and machinery exports. It is also because of the mini trade war between the country and South Korea, one of its biggest trading partner.
In the same month, the country’s imports declined for the 17th consecutive month. Total imports declined by 17.2% to ¥5.38 trillion. In September 2019, the country imported goods worth more than ¥6.49 trillion. The contraction was slightly better than the expected decline of 21.4%.
As a result, Japan’s trade surplus rose to ¥675 billion from the previous ¥248 billion. Analysts polled by Reuters were expecting this surplus to increase to ¥989 billion. For starters, trade surplus is the difference between exports and imports.
Exports to other Asian countries dropped by 2% while those to North America rose by 2.0%. Notably, exports to the United States rose by 0.7% while those to China rose by 14%. In Western Europe, the exports fell by 6.4% while to the Middle East fell by 38.3%.
Economists believe that the Japanese government will need to pass extra spending to accelerate the recovery. The government has so far provided more than $3 trillion in stimulus. Indeed, according to government sources, the new Prime Minister, Yoshihide Suga is expected to order his government to come up with more support. However, the risk is that the country’s national debt, will continue rising. It is now at about 215% of GDP.
USD/JPY technical outlook
The four-hour chart shows that the USD/JPY price has been relatively unchanged today. It is trading at 105.25, which is a few points above the 15-day and 25-day exponential moving averages. It has also formed a bearish pennant pattern that is shown in pink. Importantly, the price has formed a head and shoulders pattern, whose neckline is at 105.05. Therefore, I suspect that the pair will continue rising, as the right shoulder forms and then fall to below the neckline.