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Japan reported a disappointing trade deficit for the month of January, signaling a weaker yen against the US dollar. The trade figures were well below the analysts’ expectations, the event of having more goods imported rather than selling made the trade balance figures stumble and missed the expectation set. The higher import statistics last January were highly swayed by the higher oil prices.

The current USD/JPY trading is at 112.87, with a session high at 113.01 and session low at 112.73. The trade balance figures opened the week sluggishly for the yen; the nation’s trade balance in January was at 1086.9 billion yen, far from the expected 625.9 billion yen, and 640.4 billion reported last December. The overall imports of Japan increase a total of 8.5% in January to 6.509 trillion yen, a rise last seen 2 years ago, the most contributing factor for the sudden surge is the 41% jump in oil price in yen terms from a year earlier.

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JPY/USD Key Notes

According to the  analysts at Brown Brothers Harriman "The US dollar peaked against the Japanese yen in the middle of last week, just shy of JPY115, and the 50% retracement of the decline since reaching JPY118.60 at the start of the year," and "The JPY112.90-JPY113.30 band offers the immediate cap on the buck. 

The JPY111.60 area is also important to support. It corresponds to a 38.2% of the dollar's recovery from last summer, and it is where a base was formed earlier this month." Ending with "The technical indicators are not generating strong signals and, although the five-day moving average crossed above the 20-day at midweek for the first time since January 6, it has not been impulsive, of the risk of being whipsawed." 

Japan, US Exports Down

Another notable forecast was from Nikkie’s economists of 629.3 billion deficit, the current merchandise trade balance of Japan with the rest of the world is around 1.087 trillion deficit. The exports of Japan in the US fell as much as 6.6% percent in January at 1.054 trillion yen, according to the published data, the country also posted a 399.3 billion yen surplus, with the US decreasing a total of 27% from 2016.

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Dollar Rises Against Yen, Flat Against Other Currencies

The moderate gain the dollar posted opening this week against the yen is not enough for the currency to overtake several other currencies. It is currently under siege and pressure from the Eurozone political instability, it is currently trading at $1.0609, inches lower compared to late Friday’s $1.0605.

According to Kyosuke Suzuki of FX and money market sales department located at Societe Generale in Tokyo that, “Because of lessons we learned from [U.K. voting and U.S. election} results last year, this issue will likely keep smoldering,” and end with “But I don’t think investors take this [French election] issue seriously for now.”

The Eurozone financial instability is currently caused by the potential victory for the far-right candidate Marine Le Pen; this can potentially spell another Brexit if France decides to exit the European Union.  News reports from last week revealed that two political leaders from the left could combine forces and possibly defogging any chance of winning of centrist’s candidate Emmanuel Macron.

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