JPY: Japanese Yen returned to sustained growth

Japanese Yen has returned to growth at the Forex currency market on Wednesday.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and started to grow, giving a buy signal, while volumes are low. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 76.50, the pair will go to 76.20 and 77.00. If   downward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that number of begun housing construction in Japan rose by 21.2% in July against the growth of 5.8% in June. In addition, preliminary volume of industrial output in Japan increased by 0.6% m/m in July against the growth of 3.8% a month earlier

The data was weak which was to the advantage of the growing Yen. From the beginning of the week, attention of the market is focused on the political changes in Japan. It became known yesterday that former Finance Minister Yosihiko Noda was elected the head of the Government of Japan. Terms of office of the ex- Prime Minister Kan expired on Tuesday. Now market will watch how consistent Noda is going to be in the monetary policy- he has already outlined three main areas of work in this post, one of it includes the fight against expensive 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.

We would remind that Rating Agency Moody's reported that rating of Japan had 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 the disaster in March and ministerial changes that take place too often in the past five years. In addition, Japanese authorities also said that they are going to invest up to $100 billion to fight against expensive Yen. Noda stated in his comments 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 current measures taken by regulator shall be beneficial for the rate of the JPY in the future.

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