USD/JPY Fundamental Daily Forecast – Technical Reversal Could Be Signaling Weakening Selling Pressure

The Dollar/Yen finished higher on Friday after the Forex pair touched its lowest level since March 24 early in the session. The move produced a technical closing price reversal bottom that could be the first sign that the buying is greater than the selling at current price levels.

On Friday, the USD/JPY settled at 108.793, up 0.030 or +0.03%.

The price action was driven by a rebound in U.S. Treasury yields that helped the U.S. Dollar stabilize after a second consecutive week of losses.

U.S. Treasury yields bounced back on Friday after the 10-year rate slipped to 1.53% in the previous session. Near the end of the session, the yield on the benchmark 10-year Treasury note rose to 1.587%. Earlier in the month, the 10-year Treasury yield recently topped 1.70%.

US Economic News

U.S. housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the highest level since June 2006. Economists polled by Reuters had forecast starts would rise to a rate of 1.613 million units in March.

Permits for future home building rose 2.7% to a rate of 1.766 million units last month, recouping only a fraction of February’s 8.8% plunge. They jumped 30.2% compared to March 2020.

Inflation concerns were on consumers’ minds early this month. A separate report from the University of Michigan on Friday showed its preliminary consumer sentiment index rose to 86.5 from a final reading of 84.9 in March. Economists had forecast the index would rise to 89.6.

Finally, the survey’s one-year inflation expectation jumped to 3.7%, the highest level in nearly a decade, from 3.1% in March. Its five-year inflation outlook was unchanged at 2.7%.

Japan Economic News

In Japan, Preliminary Machine Tool Orders came in at 65.0%, up from 36.7%. Core Machinery Orders, however, fell 8.5%, missing the 2.4% forecast and coming in below the previously reported -4.5%.

Japan’s core machinery orders unexpectedly fell 8.5% in February from the previous month, posting a second straight month of declines, government data showed last week.

The fall in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, compared with a forecast of 2.8% growth in a Reuters poll of economists, the Cabinet Office data showed.

On a year-on-year basis, core orders, which exclude those for ships and electric utilities, declined 7.1% in February, versus a 2.3% gain expected by economists.