Japanese manufacturing took a downturn in October, as Japanese Core Machinery Orders swooned, posting a decline of 6.4%. This was the first decline since June, and was much worse than the estimate of -2.1%. Tertiary Industry Activity also disappointed with a drop of 0.2%, its second decline in three readings. The economy is clearly in trouble, as two consecutive quarters of negative growth mean that the country is officially in recession. Another ominous sign is that consumer confidence indicator continues to weaken. Not surprisingly, the Japanese consumer is less optimistic, as Consumer Confidence softened for a fourth straight month, falling to 37.7 points in November.
USD/JPY posted strong gains early in the Asian session, breaking above resistance at 117.94. The pair continued to post gains in European trade, testing resistance at 118.69. The pair has since retracted.
117.94 has reverted to a support role as the dollar has pushed higher. The next support line is 116.66.
On the upside, 118.69 is under strong pressure. 119.63 is stronger. USD/JPY ratio is pointing to gains in long positions on Thursday, resuming the trend we saw earlier in the week. This is not consistent with the pair’s movement, as the yen has posted losses. The ratio has a majority of long positions, indicative of trader bias towards USD/JPY gaining ground.