USD/JPY extremely overbought even after strong Japan data

The euro was little changed after the relatively strong EU manufacturing PMI numbers. According to Markit, the bloc’s manufacturing sector went through the fastest expansion in years as more countries continued to reopen. The overall manufacturing PMI increased from 57.9 in February to 62.5 in March. The growth was led by Germany, whose PMI rose from 60.7 in March to 66.6. In France, the PMI rose to 59.3 while in Italy, it rose to 59.8. The trend will likely continue as the region accelerates its vaccination rollout.

The Japanese yen declined sharply against the US dollar even after the relatively strong economic numbers from Japan. According to Markit, the country’s manufacturing PMI increased from 52.0 in February to 52.7 in March. Further data by the Bank of Japan showed that sentiment across sectors improved in the first quarter. Sentiment among the large manufacturers increased from -10 to 5 while the small manufacturers’ index rose from -27 to -13. These numbers point to a faster recovery of the Japanese economy.

The price of crude oil rose slightly after Joe Biden unveiled a $2.3 trillion infrastructure package. The plan calls for rebuilding the country’s roads and bridges, offering subsidies to manufacturers, and boosting research and development. It also called for higher taxes to help pay for the plan. Oil prices also rose after the relatively strong global manufacturing PMI. The activity in Europe and other major Asian economies showed that activity continued to boom in March. Later today, oil prices will react to the latest inventory numbers from the US.

EUR/USD

The EUR/USD pair was little changed after the relatively strong EU manufacturing PMI numbers. It is trading at 1.1740, which is slightly above last month’s low of 1.1700. On the daily chart, the price has moved below the short and medium-term moving averages. It is also along the lower line of the Bollinger Bands while the Relative Strength Index (RSI) has continued to drop. Therefore, the pair may keep falling as bears target the next key support at 1.1650.

XBR/USD

The XBR/USD pair was little changed today as the market reacted to the strong manufacturing PMI numbers. On the four-hour chart, the price has formed a small triangle pattern while the Relative Strength Index (RSI) has remained at the neutral level of 50. The Average True Range (ATR) has also dropped, in a signal that volatility is falling. Therefore, the price may soon breakout in either direction.

USD/JPY

The USD/JPY rally continued today even after the relatively strong data from Japan. On the daily chart, the Relative Strength Index (RSI) and the Stochastic Oscillator also rallied, meaning that the pair is extremely overbought. Therefore, while the overall bullish trend may remain, there is also a possibility of a pullback.