USD/JPY supported by trade data, but rising channel remains intact
2025-10-22 11:49:53
After rising for three consecutive days, the USD/JPY exchange rate fell to around 151.70 on Wednesday (October 22), a drop of about 0.18%. The yen rose after the release of Japan's total merchandise trade balance data.
Japan's Ministry of Finance report showed that the trade deficit in September was 23.46 billion yen, slightly narrowing from the revised deficit of 24.28 billion yen in August (initial value of 24.25 billion), but failed to achieve the market expectation of a surplus of 2.20 billion yen.
Japan's exports rose 4.2% year-on-year, the first increase since April, but slightly below the expected 4.6% increase. Meanwhile, imports surged 3.3% to an eight-month high, the first increase in three months and exceeding expectations - which had expected imports to rise only slightly by 0.6%.
The yen faced challenges after the election of dovish Sanae Takaichi as Japan's prime minister on Tuesday, who has vowed to strengthen Japan's economy and defense capabilities and bolster ties with the United States.
She won the election after the ruling Liberal Democratic Party formed an alliance with the Japan Restoration Party, and the two parties reportedly signed an agreement to form a coalition government on Monday.
The US dollar index edged lower after three consecutive sessions of gains, now trading around 98.88. The dollar is expected to come under pressure due to concerns about a prolonged federal government shutdown and potential delays in the release of key economic data such as the non-farm payroll report, which has created uncertainty for financial markets and the Federal Reserve.
The CME FedWatch tool shows that the market currently expects the probability of the Federal Reserve cutting interest rates in October to be close to 99%, and the possibility of another rate cut in December to be 98%.
The US government shutdown entered its fourth week after the Senate failed on Monday for the 11th time to advance a House-passed government funding bill to end the impasse, with no signs of easing. The 50-43 vote was largely split along party lines. This marks the third-longest federal funding hiatus in modern history.
St. Louis Fed President Joseph Musallem said on Friday at the Institute of International Finance's annual membership meeting in Washington, D.C., that he could support a path of further rate cuts if job market risks intensify and inflation is contained. Musallem added that the Fed should not follow a preset path but rather adopt a balanced strategy.
Fed Governor Stephen Waller said Thursday he supports another rate cut at this month's policy meeting, while new governor Smilan reiterated his call for a more aggressive path of rate cuts in 2025 than his colleagues favor.
Federal Reserve Chairman Jerome Powell said last week that while the government shutdown has severely diminished the Fed's ability to gauge the economy, it still plans to implement a quarter-point rate cut later this month. He singled out weak job growth and warned that the trend could intensify.
Technical analysis on the daily chart shows that the overall bullish trend remains as USD/JPY remains within an ascending channel pattern.
On the upside, initial resistance lies at 153.27, the eight-month high set on October 10. A break above this level will push the pair to test the upper limit of the ascending channel near 156.90.
On the downside, short-term support emerges at the 9-day exponential moving average (EMA) near 151.20. A break below this level would weaken short-term upward momentum, pushing USD/JPY towards the lower boundary of the ascending channel near 150.00, which would then test the 50-day EMA support at 149.15. A sustained decline would trigger a bearish turn, putting pressure on the exchange rate to test the support level near the monthly low of 146.59.
(USD/JPY daily chart, source: Yihuitong)
At 11:49 Beijing time, the US dollar was trading at 151.71/72 against the Japanese yen.
Japan's Ministry of Finance report showed that the trade deficit in September was 23.46 billion yen, slightly narrowing from the revised deficit of 24.28 billion yen in August (initial value of 24.25 billion), but failed to achieve the market expectation of a surplus of 2.20 billion yen.
Japan's exports rose 4.2% year-on-year, the first increase since April, but slightly below the expected 4.6% increase. Meanwhile, imports surged 3.3% to an eight-month high, the first increase in three months and exceeding expectations - which had expected imports to rise only slightly by 0.6%.
The yen faced challenges after the election of dovish Sanae Takaichi as Japan's prime minister on Tuesday, who has vowed to strengthen Japan's economy and defense capabilities and bolster ties with the United States.
She won the election after the ruling Liberal Democratic Party formed an alliance with the Japan Restoration Party, and the two parties reportedly signed an agreement to form a coalition government on Monday.
Dollar edges lower amid prolonged federal government shutdown
The US dollar index edged lower after three consecutive sessions of gains, now trading around 98.88. The dollar is expected to come under pressure due to concerns about a prolonged federal government shutdown and potential delays in the release of key economic data such as the non-farm payroll report, which has created uncertainty for financial markets and the Federal Reserve.
The CME FedWatch tool shows that the market currently expects the probability of the Federal Reserve cutting interest rates in October to be close to 99%, and the possibility of another rate cut in December to be 98%.
The US government shutdown entered its fourth week after the Senate failed on Monday for the 11th time to advance a House-passed government funding bill to end the impasse, with no signs of easing. The 50-43 vote was largely split along party lines. This marks the third-longest federal funding hiatus in modern history.
St. Louis Fed President Joseph Musallem said on Friday at the Institute of International Finance's annual membership meeting in Washington, D.C., that he could support a path of further rate cuts if job market risks intensify and inflation is contained. Musallem added that the Fed should not follow a preset path but rather adopt a balanced strategy.
Fed Governor Stephen Waller said Thursday he supports another rate cut at this month's policy meeting, while new governor Smilan reiterated his call for a more aggressive path of rate cuts in 2025 than his colleagues favor.
Federal Reserve Chairman Jerome Powell said last week that while the government shutdown has severely diminished the Fed's ability to gauge the economy, it still plans to implement a quarter-point rate cut later this month. He singled out weak job growth and warned that the trend could intensify.
USD/JPY remains bullish
Technical analysis on the daily chart shows that the overall bullish trend remains as USD/JPY remains within an ascending channel pattern.
On the upside, initial resistance lies at 153.27, the eight-month high set on October 10. A break above this level will push the pair to test the upper limit of the ascending channel near 156.90.
On the downside, short-term support emerges at the 9-day exponential moving average (EMA) near 151.20. A break below this level would weaken short-term upward momentum, pushing USD/JPY towards the lower boundary of the ascending channel near 150.00, which would then test the 50-day EMA support at 149.15. A sustained decline would trigger a bearish turn, putting pressure on the exchange rate to test the support level near the monthly low of 146.59.
(USD/JPY daily chart, source: Yihuitong)
At 11:49 Beijing time, the US dollar was trading at 151.71/72 against the Japanese yen.
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