Increased imports from China and Australia tipped Japan's trade into surplus in May. GBPJPY and USDJPY remain supported and may provide bullish opportunities as the week progresses.
Japan’s trade dippedback into deficit for the first time since Jan as imports outstipped exports for the month of May. Imports exceeded estimates of 14.8% YoY to increase by 17.2% (15.2% prior) and increased by 3.5% MoM, yet this is not enough to turn around the 11.6% contraction in April. Exports missed expectations to only rise by 14.9% (16.1% forecast) yet was markedly higher than the 7.5% increase YoY seenin April. Compared with the prior month, exports have declined 7.5% in May and -12.4% in April.
The bulk of trade deficit was seen with China, Oceanaia and Australia which dragged the overall trade balance lower. Japan remains heavily in surplus with the US and has seen an increase of 15.8% YoY, a number which will be closely monitored by the Whitehouse as they move towards bilateral trade deals.
Brexit negotiations are scheduled to finally start today, although with the negotiations likey to last the best part of 18 months, it will be the markets percpetion of who is in control of the negotations as to how volatile and which direction Sterlnig trades.
It is possible that it may be a non-event in the eaarly stages, in which case we see potential for GBP to remain suppoted.
H4 has closed with a bullish outside candle, whose low respected the broken bearish trendline and the upper bullish channel. His may now provide a near-term bullish signal for GBPJPY and we can use a break of the prior candle high as confirmation of the move.
If we are instead to see price edge lower, it is possible the bearish trendline may continue to act as support and that the zone between the weekly pivot and 141.13 swing high may provide a more solid base.
USDJPY has found support above 110.70 after Friday’s sell-off in the New York session. Consumer sentiment and building permits both disappointed, which further undermines growth potential later in the year and brings into question the hike trajectory of the Fed.
H4 has confirmed a morning star reversal pattern which suggests potential for near-term strength. As there is no major US news scheduled overnight then we may struggle to gather momentum, yet as long as the low of the pattern is left untouched, it leaves potential for a base to build and a move higher later in the week. The resistance zone around the monthly pivot is a viable target.
Matt Simpson | Senior Market Analyst
A certified technical analyst, combining macro themes, monetary policy and business cycles to generate Forex and commodity trade ideas.
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