Japanese Yen, USD/JPY, Covid, Steel Prices, Technical Outlook - TALKING POINTS
- Asia-Pacific markets face US Dollar headwinds going into the weekend
- Japanese Yen falls versus USD as the island nation faces higher steel costs
- USD/JPY eyes higher ground with little resistance before the 1998 high
Friday’s Asia-Pacific Outlook
US stocks rose on Thursday, stopping a multi-day losing streak. However, that may not offer much help to Asia-Pacific markets, given a stronger US Dollar. The benchmark S&P 500 rose 0.30%, while the tech-heavy Nasdaq-100 closed in positive territory, gaining 0.02%. The small-cap Russell 2000 index underperformed, falling more than 1% as lower crude oil prices weighed on the energy-heavy index.
The Greenback rose against its major peers as short-term Treasury yields tracked higher. Rate traders are betting that the Federal Reserve will deliver a 75-basis point rate hike at this month’s FOMC meeting. A healthy slate of economic data over the last several weeks helped support that narrative. The Atlanta Fed GDPNow estimate for third-quarter GDP growth rose to 2.6% on September 1, up from 1.6% on August 26. US non-farm payrolls (NFP) data for August is due on Friday, with analysts expecting a +300k print, according to a Bloomberg survey.
A diverging policy gap between the Bank of Japan and the Federal Reserve weighed heavily on the Yen, complicating Japan’s recovery. Nippon Steel Corp. is raising prices for domestic firms in Japan later this year, according to an interview with a company executive. Toyota Motor, Japan’s largest automobile company, quickly announced an increase in the automotive steel it sells to its customers following Nippon’s announcement. The declining Yen makes importing foreign metals uneconomical due to the exchange rate, especially for smaller firms.
Iron ore prices in China fell nearly 5% on Thursday as the country’s Covid-19 outbreak forced another city to lockdown. Chengdu—a city of more than 20 million people in China’s southwest—announced a four-day lockdown late Thursday. It constitutes the country’s biggest lockdown in terms of population since April’s Shanghai closure. The China-sensitive Australian Dollar fell against the US Dollar.
Notable Events for September 02:
Philippines – Retail Price Index (June)
Japan – 3-Month Bill Auction
India – Foreign Exchange Reserves (26/AUG)
USD/JPY Technical Outlook
USD/JPY climbed above 140 for the first time since 1998. With little nearby resistance, prices may continue to rise in the near term. A bearish divergence is present in the Relative Strength (RSI) oscillator. The 161.8% Fibonacci extension is the next target for bulls before hitting the 1998 high at 147.65. That Fib extension is a bit more than 3% higher, which leaves some uncertainty in how far prices may rise in the near term, given the lack of notable resistance.
USD/JPY Daily Chart
Chart created with TradingView
--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
