The USD/JPY price fell even after the disappointing data from Japan.
Manufacturing and services PMIs began the fourth quarter below 50.
Consumer price inflation rose to 0% while the core consumer price index fell to -0.3%.
The USD/JPY fell in overnight trading, even after disappointing inflation and PMI data from Japan. It is trading at 104.70, down from 104.95 yesterday.
USD/JPY falls even after disappointing data
Japanese manufacturing sector under pressure
Japan is a well known country of manufacture. Some of its biggest brands like Toyota, Nissan and Mitsubishi all belong to this sector.
Unlike other countries like China and the United States, the country’s manufacturing sector is under severe pressure. According to Markit, the manufacturing PMI rose from 47.7 in September to 48.0 in October. While this was an improvement, it is still below 50, which is a sign that manufacturers are still having problems. Furthermore, the PMI has been below 50 since January 2019.
According to the report, manufacturers reported a weaker decline in production, new orders, new export orders, order backlogs and inventories of finished goods. Nevertheless, they reported higher input prices. In the report, Bernad Aw of Markit said
“The Japanese private sector began the fourth quarter on a weak basis, with business activity continuing to contract in October. New business inflows continued to decline, although the decline was the slowest in the current contraction sequence. Foreign demand continued to weaken”.
The Japanese government under Yoshihide Suga has taken note of the slow recovery and is planning another round of stimulus measures. So far, the government has launched economic stimulus programs worth more than $3 trillion, which has caused the national debt to reach unprecedented levels. According to the World Bank, the country now has a debt ratio of more than 236% of GDP.
The service sector also continued to struggle. The PMI was 46.9, down from 46.6 a year ago, and the report attributed this to a sharp drop in output as new orders fell. The labor market recovered moderately.
Japan is also in a phase of weak inflation. According to the Statistics Office, the CPI fell from 0.2% in August to 0.0% in September. The core CPI, which excludes volatile food and energy prices, fell to -0.3%.
Technical outlook for USD/JPY
The USD/JPY rate is trading at 104.70. On the daily chart, the price is below the 25 and 15 day exponential moving averages, while the Relative Strength Index (RSI) has dropped below 40. The price also appears to be forming a descending triangular pattern, which is shown in green. The base of this triangle is at the psychologically important level of 104.00. Therefore, I suspect that the pair will continue to fall in the near future as bears target the support at 104. Begin your trading journey with our free trading courses…