Japan’s current account surplus shrank 31.4 percent in the first half of 2020 from a year earlier to 7.31 trillion yen ($69 billion), marking the lowest level in over five years as exports and spending by visitors from overseas were hit hard by the corona virus pandemic, government data showed.

While the actual figure bettered the median forecast for a JPY 110 billion surplus, it marked a significant deterioration from a JPY 1.177 trillion surplus in May. The current account has posted monthly surpluses for six straight years.

 Exports plunged 25.7% in June from a year ago, having declined by 28.9% in May, while imports dropped an annual 14.4%, following a 27.7% annual fall in May. Primary income, which reflects returns on overseas investments, posted a surplus of 10.43 trillion yen, down 4.0 percent.

In June, the country had a goods trade deficit of 77.3 billion yen and a services trade deficit of 157.7 billion yen, both in the red for the third straight month. Primary income logged a surplus of 426.4 billion yen, down 5.8 percent.

On the other hand, US President Donald Trump’s executive orders recently renewed the strength of the U.S. dollar following the embargo on Dictok and Wechad, joining sanctions on 11 Chinese diplomats, and opening up the benefits of unemployment claims along with other domestic assistance. Further in favor of the Green Pack is the hope that the much-anticipated hopes of a US-China war and trillions of US stimuli will soon be out.

China retaliated to the US moves of sanctioning their policymakers by increasing hardships for 11 American diplomats. However, the Yi Gang, PBOC Governor says “China will continue implementing the phase-one economic and trade agreement with the United States, while measures announced to open up china’s financial sector will continue.” And US President Trump said that China phase one deal means “very little” to him.

The corona virus (COVID-19) infections in Japan is escalating. “Japan’s total corona virus cases topped 50,000 Monday with 836 new cases reported, increasing by 10,000 in just one week, as urban centers including Tokyo and Osaka continue to see high levels of infections since the central government fully lifted the nationwide state of emergency in late May.,” said Japan’s Kyodo news.

USD/JPY 4 Hour Chart:

Support: 105.70 (S1), 105.46 (S2), 105.21 (S3).

Resistance: 106.20 (R1), 10.45 (R2), 106.69 (R3).

As US gains strength against weakening JPY, we expect a bullish trend for USD/JPY.