Key Takeaways
- The Japanese Yen (JPY) strengthened against the US Dollar (USD) on Wednesday, reversing recent losses.
- Japan’s September trade deficit narrowed slightly but missed market expectations, with exports rising and imports increasing significantly.
- Lingering concerns about the prolonged US federal government shutdown and its potential impact on economic data and Federal Reserve policy weigh on the USD.
- Technical indicators suggest a persistent bullish bias for USD/JPY, despite its recent depreciation.
USD/JPY Recovers as Yen Gains Traction
The Japanese Yen (JPY) showed strength against the US Dollar (USD) this Wednesday, marking an advance after three consecutive days of declines. The USD/JPY currency pair depreciated as the JPY gained ground, influenced by the release of Japan’s Merchandise Trade Balance Total data for September.
Japan’s Trade Balance and Economic Indicators
Japan’s Ministry of Finance reported a trade deficit of JPY 234.6 billion in September. While this figure represented a slight narrowing from August’s revised deficit of JPY 242.8 billion, it fell short of market expectations, which had predicted a surplus of JPY 22.0 billion.
Exports from Japan saw a year-on-year increase of 4.2%, the first positive growth since April, though slightly below the anticipated 4.6% rise. In contrast, imports surged by 3.3% to an eight-month high, marking their first increase in three months and significantly exceeding the forecast of a modest 0.6% gain.
💡 The Merchandise Trade Balance Total, released by the Ministry of Finance, reflects the balance between a nation’s imports and exports. Japan’s economic reliance on exports means that fluctuations in this data can significantly impact its domestic economy.
US Dollar Under Pressure Amid Government Shutdown
The US Dollar Index (DXY), which tracks the USD’s performance against a basket of major currencies, edged lower on Wednesday after registering gains in the previous session. The Greenback is facing pressure due to ongoing concerns over the prolonged federal government shutdown. This shutdown has created uncertainty, potentially delaying key US economic data releases, including Nonfarm Payrolls (NFP), and adding complexity to the Federal Reserve’s (Fed) decision-making process.
- The CME FedWatch Tool indicates that market participants are pricing in a near 99% probability of a Fed rate cut in October and a 98% chance of another reduction in December.
- The US government shutdown has now entered its fourth week, with the Senate failing for the eleventh time to advance a House-passed measure to fund the government. The vote, 50-43, largely followed party lines and marks the third-longest funding lapse in modern history.
St. Louis Fed President Alberto Musalem commented that he could support further rate cuts if additional risks to employment emerge and inflation remains contained. He emphasized that the Fed should adopt a balanced approach rather than adhering to a predetermined course.
Conversely, Federal Governor Christopher Waller expressed support for another interest rate cut at the upcoming policy meeting. The Fed’s newest governor, Stephen Miran, has advocated for a more aggressive rate-cut trajectory for 2025 than currently favored by his colleagues.
Federal Reserve Chair Jerome Powell recently stated that the central bank is on track for another quarter-point interest-rate reduction this month, despite the government shutdown impacting its assessment of the economy. Powell highlighted the slow pace of hiring, noting that it may weaken further.
USD/JPY Technical Outlook
Despite the factors pressuring the US Dollar, the USD/JPY pair has maintained a bullish bias, trading near the 151.70 level on Wednesday. Technical analysis of the daily chart indicates the pair remains within an ascending channel pattern, suggesting potential for further upside movement.
The immediate upside resistance for USD/JPY is observed at the eight-month high of 153.27, recorded on October 10. A breach above this level could propel the pair towards the upper boundary of the ascending channel, potentially reaching the 156.90 level.
On the downside, the nine-day Exponential Moving Average (EMA) at 151.20 serves as the initial support. A break below this indicator would weaken short-term price momentum, potentially leading the USD/JPY pair to test the lower boundary of the ascending channel near 150.00. Further support can be found at the 50-day EMA at 149.16. A sustained decline below these levels could shift the bias to bearish, with the pair potentially navigating towards the monthly low of 146.59.
Japanese Yen Price Performance Today
The table below shows the percentage change of the Japanese Yen (JPY) against major currencies today. Notably, the Japanese Yen was strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.03% | -0.15% | -0.14% | -0.10% | -0.15% | -0.08% | |
| EUR | 0.07% | 0.03% | -0.09% | -0.07% | -0.04% | -0.05% | -0.01% | |
| GBP | 0.03% | -0.03% | -0.12% | -0.10% | -0.07% | -0.09% | -0.04% | |
| JPY | 0.15% | 0.09% | 0.12% | 0.00% | 0.06% | 0.03% | 0.09% | |
| CAD | 0.14% | 0.07% | 0.10% | -0.01% | 0.03% | 0.02% | 0.06% | |
| AUD | 0.10% | 0.04% | 0.07% | -0.06% | -0.03% | -0.02% | 0.02% | |
| NZD | 0.15% | 0.05% | 0.09% | -0.03% | -0.02% | 0.02% | 0.04% | |
| CHF | 0.08% | 0.01% | 0.04% | -0.09% | -0.06% | -0.02% | -0.04% |
This heatmap illustrates the daily percentage changes among major currencies. The base currency is listed in the left column, and the quote currency is in the top row. For instance, the value where the JPY row and USD column intersect represents the percentage change of JPY relative to USD.
Final Thoughts
The Japanese Yen experienced a modest recovery against the US Dollar, driven by its trade balance data. Meanwhile, the US Dollar remains under scrutiny due to the ongoing government shutdown, contributing to market uncertainty. Technical analysis suggests that while the USD/JPY pair shows a bullish tendency, key support and resistance levels will be crucial in determining its near-term trajectory.