JPY: Japanese Yen has ignored regulator, as well as rating

At the Forex currency market on Tuesday, the Japanese Yen rate remains strong in the middle of the week, regardless developments negative for Japan.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and is moving along the signal line, not giving a clear signal. Stochastic Oscillator remains in the neutral zone and is not giving a clear indications of movement direction.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 76.85, the pair will go to 77.00 and 77.50. If   upward breakdown does not take place the pair will consolidate close to the current levels.

This morning, Rating Agency Moody's reported that rating of Japan has been downgraded to AA3. According to Moody’s the country is under the threat of high level of budget deficit, which has already reached 200% of GDP. In addition, the memorandum has mentioned aftermaths of disaster in March and ministerial changes that take place too often in the past five years.

Japanese authorities also said this morning that they are going to invest up to $100 billion to fight against expensive Yen. In his comments Noda stated that the reserves of the fiscal year of 2011 can be used in the fight against expensive Yen and that most likely these measures will help to “weaken” the JPY. Finance Ministry explained in the comments that measures taken by regulator today shall be beneficial for the rate of the JPY in the future. It could be the truth in the future, however today the JPY does not respond to the measures and statements and remains close to the highs of March.

Representative of Japanese monetary authorities Mr. Noda said earlier that government elaborates on the solution for the problem of expensive Yen and it is possible that the third edition of the emergency budget will contain measures to support economy which suffers from impact of expensive YPY. According to the politician, close cooperation of the Big Seven and of Big 20 can contribute to complete turnaround in the ascending channel of the JPY.

According to 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%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the country of the rising sun said that Japan will demonstrate the rise of economy next quarter.

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