JPY: Japanese Yen continues to grow on Tuesday

The Japanese Yen rate continues to grow at the Forex currency market on Tuesday the Yen still maintains its status of the protective currency amid investors risk aversion.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY; however it started decline, caused by the falling volumes, which creates prerequisites for a pair sell signal. Stochastic Oscillator remains in the oversold zone today and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 82.30 the pair will go to 82.15 and 82.00.

The growth of JPY lately is explained by the investors’ risk aversion which is associated with external background: at first, talk about debt intensified, then the U.S. credit rating was downgraded. Meanwhile JPY preserves its “protective” properties. Statistics showed previously that the revised volume of industrial output in Japan rose by 1.8% m/m in February against the preliminary level of +0.9%. This is a mediate indicator for the Yen because it shows the situation prior to the earthquake in March. Statistics released this week showed that volume of orders for the basic production equipment in Japan reduced by 2.3% m/m in February for the first time in the last three months while a month earlier the index had increased by 4.2%. The indicator gives an idea about the amount of capital investments in production sector for the next 3-6 months. Thus, continuation of companies’ cost reduction threatens to the Japanese economy in addition to the fact that the situation in the business sector has already been very hard after the series of earthquakes and tsunamis.

Statistics released earlier was positive (unemployment rate amounted to 4.6% in February, unrevised; balance of current account increased by 3.0% y/y in February against the fall by 47.6% in January; level of import increased by 3.3% y/y, export rose by 4.1% y/y).

Yesterday Japanese Ministry of Finance began to repurchase government bonds from the market in the amount of  Y160 billion. Japanese Finance Minister Mr. Yosano noted yesterday that economic recession after the earthquake is temporary and by the end of the year the situation can improve in the Country of the Rising Sun. According to Yosano the main factor of uncertainty is instability of power supply and its possible shortage. Therefore internal situation in the country is still difficult, however demand in the Yen overbalances due to the negative external background.

[More]