Search ForexCrunch
  • USD/JPY slid below the 104.00 level on Tuesday as USD softened amid US fiscal stimulus hopes.
  • Important Japanese trade numbers for November and PMI numbers for December are incoming.

USD/JPY was hit on Tuesday, closing the session with losses in excess of 0.3% or 30 pips and sliding beneath the 104.00 level amid a gradual weakening of USD back towards annual lows. The pair currently trades in the 103.60s and is eyeing a test of monthly lows close to 103.50.  

A risk-on feel to trade on Tuesday amid growing hopes for further US Covid-19 fiscal aid as both the Republicans and Democrats agreed to stay in Washington until a deal was agreed was the main driver of the softer USD and higher risk asset prices and JPY did surprisingly well amid risk-on conditions. JPY gains vs USD will be put to the test during Wednesday’s Asia Pacific session, however, with a few key Japanese data releases incoming.

Japanese data in the spotlight

First up at 23:30GMT, Japanese trade numbers for November will be released; most analysts expect the country to print a large trade surplus of more than JPY 500B. The YoY rate of export growth is seen rising above zero for the first time since November 2018, a reflection of the strong rebound in demand for physical goods elsewhere in the global economy (such as China and the US, where retail sales quickly rebounded to record highs). However, the annual rate of growth of Imports is expected to remain deeply in negative territory at -10.5%, up from -13.3% the month before.

JPY traders will then be on standby for the release of preliminary December PMI numbers at 00:30GMT; manufacturing PMI is expected to drop slightly to 48.9 from November’s 49.0 reading. Though this would imply that economic activity in the Japanese manufacturing sector has been in contraction in December so far, note that an as expected number would keep manufacturing PMI at similar levels to where it spent most of 2019 and early 2020 prior to the pandemic.

Whilst Japanese data releases will be worth a watch, the main focus of the Asia session will be if any further progress towards a US fiscal stimulus deal can be made by US Congressional leaders.