Japanese Yen Tries To Rebound After Recent Sell-Off

Key Insights

• Japanese yen gained ground against the U.S. dollar as traders took some profits off the table after the recent rally. 
• Australian dollar moved lower as PMI reports indicated that activity in the services segment contracted. 
• New Zealand dollar continues to trade near recent lows. 

Today, traders focused on flash PMI data from Japan and Australia. Meanwhile, the U.S. dollar moved closer to yearly highs.

USD/JPY

USD/JPY pulled back after Japan released flash PMI data for August. The reports indicated that Manufacturing PMI declined from 52.1 in July to 51 in August, compared to analyst forecast of 51.9. Services PMI decreased from 50.3 to 49.2, compared to analyst forecast of 50.5. Numbers below 50 show contraction.

The reports show that economic activity is slowing down in Japan. However, traders used the numbers as an excuse to take some profits off the table after the recent rally in USD/JPY.

From a big picture point of view, the upside trend in USD/JPY stays strong. The BoJ will remain dovish as the country’s economy needs support, which is bearish for the Japanese yen.

AUD/USD

AUD/USD traders also had a chance to evaluate the latest PMI reports. Manufacturing PMI declined from 55.7 in July to 54.5 in August, while Services PMI decreased from 50.9 to 49.6.

The weak data highlights the negative impact of the recent rate hikes. Manufacturing activity remains strong, but it may also take a hit in the upcoming months if global economic activity slows down.

AUD/USD continues to trade near recent lows and is trying to settle below the 0.6860 level. In case this attempt is successful, AUD/USD will gain additional downside momentum and head towards 0.6830.

NZD/USD

NZD/USD is trying to rebound from recent lows, but it remains to be seen whether it will be able to gain sustainable upside momentum. There are no specific catalysts for NZD/USD today, so traders are focused on general market sentiment and the dynamics of AUD/USD.

The U.S. dollar continues to gain ground against a broad basket of currencies. The U.S. Dollar Index managed to get above the 109 level and is moving towards yearly highs near 109.30. A move above this level will put additional pressure on NZD/USD.

For a look at all of today’s economic events, check out our economic calendar.