USD/JPY is forming head and shoulders as exports decline for 22 consecutive months.

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The USD/JPY pair has changed little today as traders react to Japanese export and import figures.
The country’s exports fell 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 has hardly changed as the market reacts to recent Japanese trade figures. The pair is trading at 105.25, which is close to Friday’s closing price of 105.35.

USD/JPY trending higher
Japan improves trade figures

Japanese exports and imports continued to decline as the country’s economy continued to recover. According to the Ministry of Finance, the country’s exports fell by 4.9% to ¥6.05 trillion. This decline was worse than the 2.9% that economists had expected. Nevertheless, it was better than the 14.8% decline in August. It was also the best the country has seen in seven months.

However, Japan’s exports have declined for the last 22 consecutive months. This decline is due to lower exports of vehicles and machinery. It is also due to the mini trade war between the country and South Korea, one of its largest trading partners.

In the same month, the country’s imports fell for the 17th consecutive month. Total imports fell by 17.2% to ¥5.38 trillion. In September 2019, the country imported goods worth more than ¥6.49 trillion. The decline was slightly better than the expected 21.4% decline.

As a result, Japan’s balance of trade surplus rose from ¥248 billion to ¥675 billion. Analysts interviewed by Reuters expected the surplus to increase to ¥989 billion. First, the trade surplus is the difference between exports and imports.

Exports to other Asian countries fell by 2%, while exports to North America rose by 2.0%. In particular, exports to the United States increased by 0.7%, while exports to China grew by 14%. In Western Europe, exports decreased by 6.4%, while exports to the Middle East fell by 38.3%.

Economists believe that the Japanese government must pass on additional spending to accelerate the recovery. The government has so far provided more than $3 trillion in incentives. Indeed, according to government sources, the new Prime Minister Yoshihide Suga is expected to instruct his government to provide more support. However, there is a risk that the country’s national debt will continue to rise. It currently stands at about 215 % of GDP.

Technical outlook USD/JPY
USD/JPY technical table

The four-hour chart shows that the USD/JPY has remained relatively unchanged today. It is trading at 105.25, which is a few pips above the 15-day and 25-day exponential moving average. It has also formed a bearish pennant pattern, which is shown in pink. Importantly, the price has formed a head and shoulder pattern with the neckline at 105.05. Therefore I suspect that the pair will continue to rise as the right shoulder forms and then falls below the neckline.

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