USDJPY trending higher today due to the weaker yen, the US dollar showed a strong recovery against the Japanese yen, driven by a combination of deteriorating market sentiment and a weaker yen as the USDJPY pair managed to recover most of its losses from the previous Friday, rising to intraday highs near 146.00. Market sentiment, influenced by geopolitical and economic uncertainties, played an important role in pushing the US dollar higher. In addition, the weakness of the Japanese yen contributed in the increasing rise of the currency pair.
The impact of US economic indicators:
Despite concerns about weakness in the US Producer Price Index (PPI), the US dollar showed resilience during a relatively quiet trading session, coinciding with the US markets closed for Martin Luther King’s birthday. The market’s ability to ignore this weakness reflects the inherent strength.
As the Bank of Japan’s monetary policy meeting approaches, the impact of weak Tokyo Consumer Price Index (CPI) and wage data from the previous week became clear. These factors crushed expectations of any monetary policy normalization at the January meeting, putting the yen on the defensive for the week.
With the Bank of Japan’s monetary policy meeting approaching, Tokyo’s weak CPI and wage data seen last week have virtually ignored any monetary policy normalization at the January meeting. He is likely to remain on the defensive this week.
The most important event in the US calendar will be the release of retail sales on Wednesday. In Japan, all eyes are on the national consumer price index data due on Thursday. The risks of this event are negative for the yen.
Technical Analysis:
Technical indicators point to an uptrend, with the bulls targeting Thursday’s high of 146.40 and aiming for further gains up to 147.45. Spot support levels are set at 144.35 and 143.55, providing insights for traders navigating market volatility.
USDJPY: Global Factors and Economic Data
The USDJPY currency pair occupies a prominent position, as the direction of the dollar / yen reflects many influences ranging from economic factors to global events, the most important of which are the following:
1. Global economic factors:
Geopolitical events and global economic conditions can have a significant impact on the USDJPY pair. Traders should keep an eye on developments such as trade tensions, economic indicators from major economies, and geopolitical stability.
2. The impact of retail sales in the United States:
The release of US retail sales data on Wednesday is expected to be a market-moving event. Strong retail sales figures could strengthen the US dollar, indicating consumer confidence and economic strength. Conversely, weaker-than-expected results may lead to volatility.
3. Japanese inflation fears:
The downside risks associated with the upcoming release of Japan’s National Consumer Price Index data on Thursday revolve around potential deflationary pressures. A lower-than-expected inflation figure could exacerbate concerns about the BoJ’s ability to spur economic growth.
4. Bank of Japan Future Directions:
Traders will closely monitor any guidance provided by the Bank of Japan during the monetary policy meeting. Any statement regarding interest rates, quantitative easing and the overall economic outlook significantly affects the direction of the dollar/yen.
5. Market sentiment and risk appetite:
USDJPY is often influenced by broader market sentiment and risk appetite. The risk environment, characterized by a preference for high-yielding assets, tends to weaken the yen and strengthen the US dollar.
6. The impact of the US dollar index:
Looking at the broader strength of the US dollar, observing the US Dollar Index (DXY) can provide a comprehensive view. Moves in the DXY index, which measures the value of the dollar against a basket of major currencies, could affect the direction of the dollar/yen.
7. Economic Policy Developments:
Any announcements or indications regarding changes in economic policy, fiscal stimulus, or monetary policy adjustments from the United States or Japan can significantly affect the currency pair.
USDJPY Trend: Japan’s Business Challenges for 2023
The dollar/yen trend could be affected by the recent challenges faced by Japanese companies, including the number of corporate bankruptcies in Japan rising in 2023, surpassing 8,000 for the first time in four years. Higher material prices and wage increases have significantly impacted corporate profits, leading to a 35.2 percent increase in bankruptcies for companies with debts exceeding 10 million yen ($68 million). Labor shortages, especially in the construction industry, and rising prices of raw materials and energy have led to further pressure on businesses, exacerbated by repayment of loans provided under the government’s pandemic relief program.
Corporate bankruptcy and sectoral implications:
In all industries surveyed, there was a unanimous increase in bankruptcies, with the services sector recording the highest number of cases at 2,940, representing a significant increase of 41.7 percent. The construction industry followed closely with 1,693 bankruptcies, reflecting a significant increase of 41.8 percent. Total liabilities left by bankrupt companies increased by 3.1 percent, to 2.4 trillion yen.
TSE Initiatives:
In a separate development, the Tokyo Stock Exchange announced the names of listed companies that responded to its call to increase the value of their companies. By the end of 2023, 660 top-tier major market companies and 191 reference market companies had identified measures to enhance their business performance, accounting for about 12 percent of listed companies. The exchange highlighted its continued commitment to encouraging companies, with 155 companies from the primary market and 109 from the benchmark market considering.
