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- The USD/JPY slumped again as traders reacted to the robust manufacturing PMI data from Japan.
- The data showed that the manufacturing PMI increased from 49.0 in November to 49.7 in December.
- However, Japan’s trade disappointed in November as exports and imports fell by 4.2% and 11.1%.
The USD/JPY is in its fourth straight day of losses as the market reacts to the mixed economic data from Japan. It is trading at 103.60, which is the lowest it has been since November 9.
Japan manufacturing sector expands
December is turning out to be a good month for Japanese manufacturers. That’s according to the latest manufacturing PMI data compiled by au Jibun bank and Markit.
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Its flash manufacturing PMI rose to 49.7 in December, the highest reading since June 2019. While the PMI has not crossed the important level of 50 this year, it has been on a steady increase from its year-to-date low of 37.8. Today’s reading was better than last month’s increase of 49.0 and the median estimate of 48.9.
According to Markit, this improvement was mostly because of the robust international demand and higher input prices. Firms also increased their level of confidence on the overall global economy. That pushed them to increase the number of people they employed. In a note, Usamah Bhatti of Markit said:
“One positive note was private sector businesses in Japan recording the softest rate of job shedding in ten months, as overall employment levels only reduced fractionally. Manufacturing staffing levels even ticked higher.”
Still, like in most countries, the services sector continued to struggle. The PMI declined from 47.8 in November to 47.2 in December.
Japan trade disappoints
The USD/JPY also reacted to the relatively weaker trade numbers from Japan. In a report, the Ministry of Finance said that exports dropped by 4.2% year-on-year in November even as sales to China rose. This was partly due to a 2.5% decline of exports to the United States and the European Union. Sales to other Asian countries also dropped by 4.3%.
Exports dropped by a bigger margin. They fell by 11.1%, missing the expected decline of 10.5%. This led to the trade surplus to decline from the previous month’s 871 billion yen to 366 billion yen. Economists were expecting the surplus to fall to 529 billion yen.
USD/JPY technical outlook
The USD/JPY pair dropped sharply today as forex investors reacted to the mixed economic data from Japan. On the daily chart, the pair has formed a descending black channel. It is also slightly below the 25-period and 50-period exponential moving averages while the Relative Strength Index (RSI) has continued to fall.
Therefore, in the near term, the pair will possibly continue falling as bears aim for the lower side of the channel at 103.00. You can learn how to conduct comprehensive technical analysis in our free forex courses.
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