USD/JPY rises as Japan exports rise at the fastest rate in 40 years

on Jun 16, 2021
  • The USD/JPY pair rose slightly after the latest Japan trade data.
  • The country’s exports rose at the fastest pace in more than 40 years.
  • The pair will later react to the latest FOMC decision.

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The USD/JPY pair held steady during the Asian session after the relatively mixed economic data from Japan. It is trading at 1110, where it has been in the past few sessions.

USD/JPY chart

Japan trade numbers

The Japanese economy is staging a strong comeback helped by the strong global recovery. This was evidenced on Wednesday when the country reported strong trade numbers. According to the Finance Ministry, the country’s exports rose at the fastest pace in more than 40 years. 

In total, the country’s exports rose by 49.6% year-on-year in May to more than 6.2 trillion yen. This increase was relatively smaller than the median estimate of a 51% increase. In the sane period, imports increased by 27.9% to 6.44 trillion yen. This trend pushed its trade deficit to more than 187 billion yen. 

Additional data from Japan showed that the country’s core machinery orders rose by 0.6% month-on-month, leading to a YoY increase of 6.5%. The two were lower than the median estimates of 2.7% and 8.0%. These are important measures of capital spending.

The data send a picture that the Bank of Japan will likely stick to its easy-money policies in the decision that will come on Friday. As part of this policy, the bank has lowered interest rates and bought trillions worth of assets.

Looking ahead, the USD/JPY pair will react to the latest interest rate decision by the Federal Reserve that will come out on Wednesday. The bank is expected to leave interest rates unchanged and make the case that the ongoing growth is transitory. The weak US retail sales data published on Tuesday will likely give the bank cover to do that. The pair will also react to the latest US housing starts and building permit numbers.

USD/JPY technical analysis

USD/JPY technical chart

The four-hour chart shows that the USD/JPY pair was little changed after the impressive economic data from Japan. The pair is slightly below the 78.6% Fibonacci retracement level and slightly above the 25-day and 50-day exponential moving averages. 

It is also between the ascending channel that is shown in blue. Further, it also seems like it has formed a small bullish flag pattern. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 110.50.