JPY: Japanese Yen is of interest to investors as a safe harbour

At the Forex currency market the Japanese Yen rate is traded upward on Tuesday; investors have shifted to “safe harbors” due to the aggravations in Middle East, in particular in Libya where military equipment was brought on to the streets to disperse anti-government demonstrations.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY and continues to grow steadily, giving a pair buy signal. Stochastic Oscillator is approaching oversold zone today, continuing to give a pair sell signal.

Forex recommendations: if current trends are maintained and in case of breakdown at the level of 82.80 the pair will go to 82.50 and 82.20.

This week rating agency Moody's Investors Service announced downgrade of Japanese rating, which is now at Aa2, from “stable” to “negative” because growing budget deficit in the country and the lack of effective political measures are the risk factors for the national economy. 

However, it did not affect the rate of the JPY yet: investors are too focused on the external background.

The data released yesterday showed that index of activity in all sectors of Japan continued to decline in December: by 0.2% m/m against similar reduction level in November. At the same time experts of Nomura Bank reported last week that the worst stage is over for the economy of the Country of the Rising Sun and the process of economic recovery will accelerate. It agrees with the assessment of the Bank of Japan which emphasized that Japanese economy is strong enough now to cope with consequences of temporary recession. That seems to be an interesting resonance.

In addition the data released earlier showed that revised index of leading indicators in Japan increased by 0.8% in December; while index of coincident indicators was revised to+1.1%. As macro-data showed yesterday, actual GDP declined by 0.3% q/q (forecast-2.0% y/y) in QIV, 2010; index of capital expenditures increased by 0.9% q/q in QIV against +1.5% in QIII. Therefore, the main publication earlier this week- Japanese GDP was above forecasts, however this effect can be temporary, since the economy of the country is still in the complex situation. 

The minutes of the last meeting of the Bank of Japan on 25-26 January, released today were just a standard document without any further details. Judging by the minutes, it is not yet clear whether the continuation of the Japanese economy stabilization is worth waiting in the nearest future.

 

[More]