Japanese yen ticks higher

The Japanese yen has recorded slight gains for a second straight day. Currently, USD/JPY is trading at 105.68, down 0.18% on the day.

The yen was down over 1 percent against the US dollar this week, but has managed to reverse directions. Much of the pair’s movement this week can be attributed to the movement of US Treasury bonds, as USD/JPY is particularly sensitive to US/Japan rate differentials. The rise in US yields, especially the 10-year bonds, has pushed the yen lower. However, with Treasuries currently moving sideways, the Japanese currency has been able to make up some ground. On Tuesday, the dollar pushed the yen above the 106 level for the first time since September 2020. If US yields resume their upward movement, the pair should move upwards into 106 territory.

In the US, Retail Sales for January were much more robust than forecast, with a sharp gain of 5.3%. The street consensus stood at 1.1%. This comes after two straight declines and was the strongest gain since May. The sparkling reading can be attributed to an easing in health restrictions, as well as the latest round in stimulus payments. The Biden stimulus package is winding its way through Congress and should be approved in March. The additional stimulus is expected to trigger a further increase in consumer spending, a key driver of economic activity.

The US recovery remains bumpy, and this was underscored on Thursday by the unemployment claims release, which was higher than expected for a second straight week. Unemployment claims rose from 793 thousand to 861 thousand, well above the estimate of 775 thousand. As the vaccine rollout gains traction, the US economy will open up, which should lead to a stronger labor market, and with it a decrease in unemployment claims.

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USD/JPY Technical Analysis

• USD/JPY is testing resistance at 105.59. The next resistance line is at 106.26
• There is support at 104.33, followed by a support line at 103.74
• The 50-day moving average (MA) is situated at 104.45

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