Japanese Yen, USD/JPY, Market Sentiment, China PMI, Technical Outlook – Talking Points

  • Asia-Pacific markets may follow with the risk-off tone set on Wall Street in overnight trade
  • China’s PMI data for March set to cross the wires today may influence market sentiment
  • USD/JPY technicals point to more weakness in the short-term after a multi-day drop

Thursday’s Asia-Pacific Outlook

The Japanese Yen gained against the US Dollar and Australian Dollar overnight as traders shifted to a risk-off stance on Wall Street. The tech-heavy Nasdaq-100 Index (NDX) lost 1.10%, reversing the prior day’s gain. The DXY US Dollar Index fell to its lowest lever overnight as bond yields fell amid Treasury-friendly haven flows. Buying was more aggressive on the longer-end of the curve, pushing the 2Y/10Y yield spread higher, which negated some fears triggered by this week’s yield curve inversion.

Oil prices gained, with WTI crude prices outpacing the move higher relative to Brent prices, the globally priced benchmark. The Energy Information Administration’s Weekly Petroleum Status Report showed a 3.45 million barrel draw for the week ending March 25. That was a bigger reduction than the 1 million barrel draw analysts expected. The above average number of exports the week prior may have played a role in that outsized inventory drawdown.

This morning, South Korea released several economic data points for the February period. Manufacturing production rose 6.2% on a y/y basis in February, up from 4.2%, while industrial production rose 6.5%, beating the 4.5% consensus analyst estimate. Japan is due to release its own industrial production data for February, with analysts expecting the February print to rise 0.5% month-over-month. The recent Yen strength may put pressure on Japan’s Nikkei 225 index today.

The Australian Dollar will come into focus later today. China’s National Bureau of Statistics (NBS) is set to release purchasing managers’ indexes for the manufacturing and services sectors. The Bloomberg consensus estimate sees manufacturing activity falling to 49.8 for March. That would put China’s manufacturing sector into contraction. A larger-than-expected drop may bolster the risk-off move in today’s trading session.

USD/JPY Technical Forecast

The Japanese Yen strengthen for a second day versus the US Dollar, pushing USD/JPY down to the 2016 high at 121.689 on an intraday basis. Prices are trading just above that level this morning. The rising 12-day Exponential Moving Average (SMA) and 20-day Simple Moving Average (SMA) may provide support if prices drop back below the level and continue lower. The Relative Strength Index (RSI) crossed back into neutral territory below the 70 mark, which may be interpreted as a sell signal. Moreover, the MACD oscillator looks on track for a bearish signal line crossover. Alternatively, the 2022 high is the most likely point of resistance if prices reverse higher.

USD/JPY Daily Chart

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Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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