JPY: Japanese Yen recovers after two days of weakness

At the Forex currency market the Japanese Yen rate started to recover on Wednesday morning after two days of rebound.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, slightly goes up, shaping a buy signal. Stochastic Oscillator is growing in the neutral zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 81.20, the pair will go to 81.40 and 81.55.

If upward breakdown does not take place, the target for the pair will be the level of 80.65.It became known in the middle of the week that preliminary volume of industrial output in Japan rose by 5.7% m/m (-5.9% y/y) in May.

The data is above the forecast (5.5%). Recall that in March, when severe earthquake and tsunami hit the country, industrial production collapsedl by 15%.It is worth noting that trade balance deficit amounted to Y853.7 billion (forecast –Y710.1 billion) against the surplus a year earlier. It became known earlier that revised real GDP in Japan fell by 0.9% on quarterly basis (-3.5% y/y) in Q1 against the forecast of -0.8%.

This data only confirms the view that Japanese economy is weak – GDP fell lower than expected, although the forecast had been quite pessimistic. According to the data released earlier trade balance deficit in May (first 20 days) rose to Y1.053 trillion against the level of Y465 billion in April. It also became known that exports volume for the first 20 days in May totaled - 9.3% y/y versus the fall of -12.4% in April.

Statistics remain mixed. Preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; in addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has confronted with the rise in inflation for the first time over 28 months, which is crucial for the economy; however, it requires confirmation over the next few months.

Japanese consumer prices grew by 0.6% y/y excluding food, and prices for utilities and food skyrocketed.The issue of Naoto Khan’s resignation has not been resolved yet. On Tuesday morning the politician outlined his position: he suggested to the opposition that he would resign if parliament adopts three disputable bills, including additional budget for the next year. Plus, draft bills on source of renewable energy and deficit financing with the help of issuing bonds- the last one is very important.

Responses from opposition  has not been reported.The data released yesterday showed that preliminary retail sales in Japan decreased by 1.3% y/y in May, against the forecast of reduction by -2.2% y/y. The data was better than expected which was caused by the effect of the Japanese economic recovery after the disaster of 11 March. 

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