JPY: Japanese Yen continues to go down

At the Forex currency market rates of the Japanese Yen continues to weaken on Monday for the third day in a row.

Forex forecast: MACD indicator for the pair USD/JPY is growing in the positive area and is giving a buy signal. Oscillator also goes up in the neutral zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 78.05, the pair will go to 78.10 and 78.30. If upward breakdown does not take place, the pair can go back to 77.40.

Situation in Japanese economy has not changed fundamentally. The JPY is getting weaker following a decline in interest to safe currencies and also due to expectations of new intervention of the Bank of Japan.Last week, the head of the Bank of Japan Mr. Shirakawa noted that growth of the JPY continues to negatively impact on the local economy and that current rise of the JPY was provoked by European crisis. He believes that if appropriate measures are not taken straight away, economy of Japan will decline sharply by 2030.

Mr. Shirakawa also noted that interventions against Yen are acceptable and effective. Statistics released last Friday showed that orders in the construction sector of Japan amounted to+24.3% y/y in October. In addition, preliminary industrial output rose by 2.4% m/m (+0.4% y/y) in October against the forecast of +1.1% m/m. nevertheless not everything is so positive: PMI in the manufacturing industry declined to 49.1 points in November, as per Markit/JMMA estimates, against the level of 50.6 points in October.

It became known earlier that unemployment rate in Japan increased to 4.5% in October against the level of 4.1% in September, while expectations were at 4.2%. The rate is increasing for the first time in three months, which is an indication of a new round of slowdown in Japanese economy. Large funds have been invested into Japanese economy following the earthquake in March, which explains fairly rapid recovery; however the rate of recovery started to decelerate lately. It should be closely tracked to what extent European economic slump would affect Japanese economy.

Another “fly in the ointment” came from rating agencies: Japanese agency R&I forwarded AAA rating of country for the review with probability of downgrade. Rating agency S&P said earlier that Japanese rating is going to be revised soon, as financial situation in the country is worsening every day. According to the economists of the Agency it is hardly probable that Japan will be able to avoid debt problems. Therefore, mixed investors’ sentiment at the world financial platforms has more impact on the JPY than the threat of intervention of the regulator into the trading process.