USD/JPY under pressure as Japan exports drops for 23 straight months
- The USD/JPY is tilting lower after Japan released mixed trade numbers.
- Exports dropped by 0.2% the lowest decline in months while imports fell by 13.3%.
- The trade surplus improved to 872 billion yen at the start of the fourth quarter.
Japan’s exports and imports declined in October as the country’s key buyers continued to emerge from the worst recession in decades. In response to the data, forex investors pushed the USD/JPY up to 104.12.
Japan exports drop for 23 consecutive months
Exports are an essential part of the Japanese economy. Together with private consumption, exports contribute the biggest share to the country’s economy.
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According to the Ministry of Finance, Japan’s exports fell by 0.2% to ¥6.5 trillion yen in October. In the same month in 2019, the country exported goods worth more than ¥6.57 trillion. This decline was better than September’s decline of 4.9%. It was also better than the economists estimates’ of a 4.5% drop. Notably, the exports have been in the red in the past 23 months.
Imports also declined in October. The country imported goods worth more than ¥5.6 trillion, down by 13.3% from the same month in 2019. This data was better than September’s decline of 17.4% but worse than the expected decline of 9.0%. The country’s exports have fallen for the past 14 consecutive months.
As a result, Japan’s trade surplus rose to ¥872 billion, which was the highest it has been since February this year.
The data showed that Japan’s exports to Asia rose by 4.4%, with those to China rising by more than 10%. Those to the United States rose by 2.5% while those to the Europe declined by 7.9%. Specifically, sales to the UK, France, Italy, Spain, and Sweden dropped by more than 10%. By sectors, Japan machinery shipments dropped by 2.8% while motor vehicles rose by 3%.
The trade numbers came a few days after the country released relatively strong economic data. Data by the Cabinet Office showed that Japan’s GDP expanded by 21.4% in the third quarter, a sharp reversal from the previous quarter’s decline of 28.8%. These numbers were led by strong exports and private consumption in the third quarter. Therefore, today’s trade numbers are evidence that the country’s economy continued to do well at the start of Q4.
USD/JPY technical outlook
The USD/JPY price is trading at 104.12. On the four-hour chart, the pair is a few pips above yesterday’s low of 104.04. The pair has fallen by more than 1.45% since November 11. On the four-hour chart, it is slightly above the lower line of the Bollinger bands and below the 25-day moving average.
The Relative Strength Index (RSI), which is an important oscillator, has also fallen from last week’s high of 72 to the current 35. This means that the USD/JPY is not yet in the oversold level, which is an indicator that the price will continue falling to possibly below 104.00.