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19 Mar 2014
Flash: Japan trade balance downbeat, USD/JPY still a buy - RBS
FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, shares his thoughts on the latest Japanese trade deficit numbers, in which a disappointing number was again released.
Key Quotes
"Japan trade balance s.a. is -800 bn JPY in Feb, weaker than -600bn expected, improving less than expected from its record deficit of -1763 bn in Jan (revised narrower a bit from -1818bn). The data should support USD/JPY. With potential for dovish comments from Kuroda today at a panel discussion and generally solid global risk appetite, USD/JPY should respect recent lows near 101.20."
"The chart below shows the trade deficit as a % of GDP. It spiked to an alarming wide deficit of 4.4% of GDP in Jan, narrowing to 2.8% in Feb, its best result since August, but on a three-month average basis, it improved only slightly from -3.7% of GDP to -3.5%."
"As we discussed on Monday, a press article quoting BoJ Governor Kuroda, suggested he was moving to increase guidance on a preparedness to do more easing if required. While Kuroda has made a virtue of keeping a steady line of rhetoric that the recovery is on track and the BoJ policy is working, there is increased risk (in light of weakness in Japanese equities and stronger JPY since January) that he takes makes more dovish comments at his appearance today."
"USD/JPY has failed to benefit from an improvement in global equities in recent sessions, held down by low US yields. The unfolding risks in CNY may also be a factor supporting JPY, but other Asian currencies suggest fallout from CNY volatility and property sector strains have been minimal. Considering the relatively low level of USD/JPY we think it is worth considering a long position. Key downside supports are 101.20 (recent low) and several supports between 100.40 and 100.90."
Key Quotes
"Japan trade balance s.a. is -800 bn JPY in Feb, weaker than -600bn expected, improving less than expected from its record deficit of -1763 bn in Jan (revised narrower a bit from -1818bn). The data should support USD/JPY. With potential for dovish comments from Kuroda today at a panel discussion and generally solid global risk appetite, USD/JPY should respect recent lows near 101.20."
"The chart below shows the trade deficit as a % of GDP. It spiked to an alarming wide deficit of 4.4% of GDP in Jan, narrowing to 2.8% in Feb, its best result since August, but on a three-month average basis, it improved only slightly from -3.7% of GDP to -3.5%."
"As we discussed on Monday, a press article quoting BoJ Governor Kuroda, suggested he was moving to increase guidance on a preparedness to do more easing if required. While Kuroda has made a virtue of keeping a steady line of rhetoric that the recovery is on track and the BoJ policy is working, there is increased risk (in light of weakness in Japanese equities and stronger JPY since January) that he takes makes more dovish comments at his appearance today."
"USD/JPY has failed to benefit from an improvement in global equities in recent sessions, held down by low US yields. The unfolding risks in CNY may also be a factor supporting JPY, but other Asian currencies suggest fallout from CNY volatility and property sector strains have been minimal. Considering the relatively low level of USD/JPY we think it is worth considering a long position. Key downside supports are 101.20 (recent low) and several supports between 100.40 and 100.90."