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Yen Strengthens Despite Weak Trade Data

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Yen Strengthens Despite Weak Trade Data

The EURJPY cross moved lower on Thursday but continues to trade in an upward trend. The currency pair has rebounded after falling 9 big figures on January as the yield differential has moved in favor of the Euro. Manufacturing numbers in both the Euro zone and China were weaker than expected, allowing the safe haven yen to gain traction.

Eurozone flash manufacturing PMI has slipped to 53 in February from 54 in January and came in below expectations of an estimate of 54. German growth slowed and France’s contraction accelerated. The Eurozone’s services print has edged up, but the composite output has fallen to 52.7 from 52.9.

The yen strengthened despite an increase in the Japanese trade deficit. The Japanese trade deficit soared to record. Japan’s trade deficit more than doubled to a record 2.79 trilling yen in January from 1.3 trillion in December and exceeded consensus of 2.49 tillion. Export growth slowed while imports soared 25%. In Q4, a large trade deficit contributed to GDP expanding at a lower-than-expected 1%.

chart-yen-strengthens-despite-weak-trade-data.png

The EURJPY has rebounded nearly 3 big figures since hitting its low near 136, and is poised to test resistance near 142.50. Support is seen near the 10-day moving average at 139.50. Momentum is positive as the MACD (moving average convergence divergence) index is printing in positive territory after generating a buy signal last week. The trajectory of the MACD is positive which foreshadows a higher exchange range. The relative strength index (RSI) edged lower with price action on Thursday, after climbing from oversold levels just a week ago. The RSI is currently printing a reading of 50, which is in the middle of the neutral range and reflects contraction.

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