JPY: Japanese Yen continues to pursue a course of strengthening

At the Forex currency market the Japanese Yen rate is traded upward on Thursday; the JPY retains strength, amid strong interest of traders in hedging their positions. 

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and is going down, giving a sell signal. Stochastic Oscillator goes down in the neutral zone, giving a similar signal.

Forex recommendations: in case of breakdown at the level of 76.40, the pair will go to 76.20 and 75.85. The pair might go to 77.70/78.00 as part of the rebound.

Japanese Finance Minister Noda said this morning that the JPY moves in one direction at Forex and the Bank of Japan is closely monitoring all changes. Last weekend, Japanese Finance Minister Noda said that during the meeting of the Big Seven he clarified the importance of the conducted currency intervention which had been aimed to reduce the rise of the national currency. At the same time he did not indicate whether Japan is going to conduct currency intervention in the future. Despite liquidity that has been infused in the market, the Yen continues to grow again, using external instability as an activator.

We would remind that the Bank of Japan had held the meeting a day earlier than scheduled last week and  left interest rate  unchanged, in the range of 0-0.1%, at the same time program of assets purchase has been increased up to 15 trillion yen (previously: 10 trillion yen). In addition, volume of purchases of the long term government bonds was raised to 4 trillion yen (2 trillion yen earlier); size of program to purchase corporate bonds was increased to 2.9 trillion yen (2 trillion yen earlier). Economic evaluation of the Central Bank was raised again in July, because regulator believes that activity in the economy is growing fast, so economy of Japan is on the way to gradual recovery. Meanwhile, the Central Bank of Japan had carried out currency intervention to reduce pressure which Yen exerts on the economy. The volume of the intervention amounted to about 5 trillion yen and the Yen had soared up above 80.0, for the first time since July.

The data released yesterday showed that composite index of consumer confidence in Japan increased to 37.0 points in July against the value of 35.3 points in June. It also became known yesterday that current account surplus in Japan was -50.2% y/y in June, Y526.9 billion against decline of 51.7% y/y in May.

It is interesting that currency intervention that has been conducted earlier does not prevent Yen’s growth. Demand for “quiet harbor” currencies continues to be high and holds back the JPY from the rebound.

According to statistics released earlier, preliminary index of leading indicators increased to 103.2 points in June against the previous level of 99.4 points. At the same time preliminary index of coincident indicators in June was at the level of 108.6 points against the forecast of 108.7 points. Statistics is positive, it demonstrates that Japanese economy is moving towards recovery although slowly and with halts.

Statistics released earlier was mixed: unemployment rate in June was at the level of 4.6%; household spending fell by 4.2% y/y in June; net national CPI increased by 0.4% in June against the forecast of +0.5%. Exports in Japan decreased by 1.6% y/y in June against the forecast of decline by 4.1% y/y; imports rose by 9.8% y/y, while expected growth had been of 11.0% y/y.

According to the previous estimates of the Bank of Japan, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%.