Analysis and Opinion »

Yen Gains Traction Following Weak Chinese PMI; Traders Eye Services PMI

David Becker
Share on StockTwits
Published on
www.iforex.com
Yen Gains Traction Following Weak Chinese PMI; Traders Eye Services PMI

The USDJPY dropped below 102.00 for the first time in nearly three weeks, as the yen found support amid a risk-off theme in Asia following a sub-expectations final reading of China HSBC-Markit manufacturing PMI for April. Asian stocks declined on this data, and the yen followed its usual inverse correlation with equities.

China manufacturing PMI (HSBC/Markit) was 48.1 in April compared to the 48.3 figure for the preliminary release. The index was slightly above the final 48.0 in March but trailed expectations for a firmer final figure in April. The index remains in contractionary territory, consistent with ongoing slowing in the factory sector. This index contrasts with the official manufacturing PMI, released last week that showed a modestly expansionary 50.4 in April from 50.3 in March.

Looking forward traders will be eyeing the U.S. ISM-NMI, which is expected to increase to 53.5 in April from 53.1 in March. This compares to a high of 58.6 in August of last year. Services did not drop as far as manufacturing during the winter months, so the snap back now that the weather has changed is not as dramatic.

The USDJPY dipped down to trend line support, and is poised to test the bottom of the consolidation range near 101.30. Resistance is seen near the 10-day moving average near 102.30. Momentum on the currency pair is negative were the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The RSI (relative strength index) moved lower with price action, reflecting accelerating negative momentum, while printing near 44, which is the lower end of the neutral range.

Share on StockTwits