Japanese Yen Yawns After Sharp Tankan Index

The Japanese yen is showing limited movement in the Friday session. Currently, USD/JPY is trading at 111.11, down 0.11% on the day.

The yen finally stopped a nasty slide against the US dollar on Thursday, which saw it fall around two percent. The dollar briefly pushed above the 112 level for the first time since February. However, the dollar has eased lower, a result of some profit-taking and slightly lower US Treasury yields.

There was some positive news from Japan’s Tankan reports, which was welcome news after Retail Sales and Industrial Production both came in at a disappointing -3.2%. The Tankan Manufacturing Index improved to 18 in the third quarter, above the consensus of 14 and higher than the Q2 reading of 13 points. This points to stronger growth in manufacturing, but the strong release did not translate into gains for the Japanese yen.

The Federal Reserve has been in the headlines for weeks, as investors anxiously await an announcement from the Fed with regard to tapering. There are other pressing domestic issues, of course, such as the US debt ceiling and the $3.5 trillion Biden infrastructure proposal. Lawmakers managed to reach an agreement to fund the US government until Dec. 3, which essentially provides a short respite before the problem has to be dealt with again. The House of Representatives had scheduled a vote on the infrastructure bill late on Thursday, but House Speaker Nancy Pelosi was forced to delay the vote since the opposition of Republicans and progressive Democrats would have resulted in the bill being defeated. The continuing uncertainty over a possible government shutdown and the infrastructure bill is weighing on investors’ risk appetite, which could translate into gains for the US dollar.

USD/JPY Daily Chart

USD/JPY Technical

  • 109.64 is providing support. Below, there is support at 108.55
  • 111.31 has switched to resistance and is a weak line. Next, there is resistance at 111.89

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