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Yen Looks Past Local Data to US News, USD/JPY Chart Warns of Top

Yen Looks Past Local Data to US News, USD/JPY Chart Warns of Top

David Cottle, Analyst
  • Japanese cash earnings remained subdued in October
  • There was however a chunky upward revision to third-quarter GDP growth
  • However USD/JPY remained focused on its ‘USD’ side as key US events loom

Trade the major Asia Pacific economic data live and interactive at the DailyFX Webinars.

The Japanese Yen didn’t move far Friday following an all-too-familiar tale of stagnant earnings in its home nation.

October’s real cash earnings rose by 0.2%, matching estimates. Cash earnings from labor alone rose by 0.6% when the markets had looked for a 0.8% annualized gain. The rise was the weakest since July and also marks the end of a gradually rising trend seen since then.

As the nation struggles with persistently low inflation, politicians and central bankers have urged Japan Inc. to raise wages but pay settlements remain relatively modest and it seems that those calls are going largely unanswered.

This was only the latest in a veritable Japanese economic data dump released on Friday. The final official look at third-quarter Gross Domestic Product growth saw some upward revisions. These were thanks largely to increased business spending. Policymakers in Tokyo will probably like that, but they’ll also be depressed to see that private consumption levels remained negative.

On-quarter growth was 0.6%, better than the 0.4% gain expected. Annualized and seasonally adjusted it was 2.5%, much better than the previous official estimate which had been for 1.4% growth.

October’s current account balance was a surplus of JPY2176.48 billion (US$19.3 billion), above the 1932.7 billion expected. The trade balance surplus was a little higher than forecast at JPY432 billion.

The US Dollar had been gaining anyway as investors looked with hope to Friday’s official labor-market numbers and, beyond them, to the Federal Reserve’s final monetary conclave of the year. That is coming up next week and, while the well-flagged interest-rate increase is unlikely to prompt much market movement, the Fed’s collective thoughts as to how many more might come in 2018 could well do so.

That rising-Dollar impulse was not obviously weakened by the Japanese numbers.

On its broader, daily chart, USD/JPY remains in the modest uptrend channel which has governed the state of play for the last couple of weeks.

However, so far that uptrend has not been sufficient to banish the specter of a possible bearish ‘head and shoulders’ pattern which is now arguably that chart’s most ominous medium-term feature. USD/JPY will need to proceed above current levels now to negate the possibility of that formation.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.