The Canadian dollar remained range-bound against the Japanese yen on Friday following the release of mixed economic data from both countries. While Canada’s economy did not grow as anticipated in May, Japan’s retail sales data for June missed estimates. Overall, the CAD/JPY pair fluctuated between 103.56 and 104.74.
According to the Japanese Statistics Bureau, the core consumer price index for the Ku-area of Tokyo surged 2.3% y-o-y to 102.10 in July, following a rise of 2.10% in the prior month and a notch higher than the 2.20% growth anticipated by economists. The core CPI data, which takes into account energy but avoids fresh food prices, has surpassed the Bank of Japan’s inflation target of 2% for the second month in a row.
As per the Statistics Bureau, Japan’s unemployment rate was 2.60% in June, unaltered from the level recorded in May, but missing the 2.5% jobless rate anticipated by economists. The count of the unemployed stood unaltered at 1.80 million, while employment rose by 120,000 to 67.36 million.
The labor force grew by 120,000 in June to 69.16 million. Likewise, those who exited the labor force decreased by 150,000 to 40.98 million. Overall, on a y-o-y basis, the labor force participation rate increased to 63% in June 2022.
The jobs-to-application ratio hit a 26-month high of 1.27 in June, up from 1.24 in the prior month, and surpassed forecasts of 1.25. In June 2021, Japan’s unemployment rate stood at 2.90%.
According to the preliminary data published by Japan’s Ministry of Economy, Trade and Industry (METI), the country’s industrial production grew by 8.90% m-o-m in June, following a contraction of 7.50% in the prior month. The reported figure is more than double the 4.30% growth anticipated by economists.
Correspondingly, the production index stood at 95.80 in June. The shipment index rose by 4.60% to 93.30. While the inventory index gained 2.1% to 99.8 in June, the inventory ratio fell by 1% to 118.40. On a y-o-y basis, the production index fell by 3.10% to 98.50 in June 2022.
In a separate news release, METI stated that the country’s retail sales rose by 1.50% y-o-y in June, following an increase of 3.70% in the prior month, but missed the 2.80% growth anticipated by economists.
Sales of general merchandise slowed down to 4.50% in June from 20.70% in May. Likewise, fuel recorded a lower growth of 11.5%, compared with 15.20%. Fabric, apparel, and accessories posted a 1.1% decline in June, following a 12.90% increase in May. Also, motor vehicles recorded a decline of 9.20% in June, compared with an 11.1% drop in the prior month.
On a m-o-m basis, retail trade declined 1.40% in June, following a 0.70% rise in May. The reported figure reflects the first decrease in four months. According to Statistics Canada, the country’s economy remained unaltered in May, following a GDP growth of 0.3% in April, but bettered the 0.20% contraction anticipated by economists.
Services-producing industries recorded a growth of 0.40% but were negated by a 1% contraction in goods-producing industries. Fourteen out of 20 industrial segments posted growth in May.
The transportation and warehousing sector grew by 1.90% in May, reflecting the fourth successive monthly increase. Despite the growth, the sector stood 7% lower than its pre-pandemic February 2020 level. After seven months of successive growth, the manufacturing sector contracted 1.70% in May. Both durable and non-durable goods recorded a decline.
Furthermore, the construction sector contracted for the second successive month at 1.60%. Nevertheless, the accommodation and food services sector posted a growth of 1.90% in May, an increase for the fourth successive month.
The wholesale trade sector grew by 0.70% in May. Agriculture, forestry, fishing, and hunting inched up 1.60%. Crop production increased 3.4%, but mining, quarrying, and oil and gas extraction edged down by 0.10%.
The advanced data published by Statistics Canada indicates that the country’s economy expanded by 0.1% in June, aided by a growth in construction, manufacturing, and accommodation and food services sectors. The statistical organization also stated that Canada’s GDP grew by 1.10% q-o-q in June 2022 quarter.
The mixed economic data is expected to keep the CAD/JPY pair range bound in the short term.
The historical price chart indicates that the CAD/JPY pair is receiving support at 103.90. The stochastics indicator is also in the oversold region. The next resistance is anticipated only near 106.65. Therefore, we anticipate the Canadian dollar to gain ground against the yen in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
