At the Forex currency market the Japanese Yen rate suspended its decline at the beginning of the week and regains from previous sales. However, it could be just a technical rebound and later the Yen would resume its fall.
Forex forecast: MACD indicator for the pair USD/JPY goes up in the positive area and maintains a buy signal. Stochastic Oscillator remains in the overbought zone and maintains a similar signal.
Forex recommendations: in case of breakdown 79.50, the pair will go to79.60 and 79.80. Consolidation near the currentlevels is not excluded.
Such weak positions, when the JPY fell to 3.5- month lows can be explained by prior statements of the Bank of Japan.
At the meeting this week, the Bank of Japan left interest rate at the level of 0.1% per annum; however the Bank has made astep, unexpected for the market increasing volume of the asset repurchase program to 65 trillion yen versus 55 trillion yen previously. This decision was unanimous, as well as the other one: program of purchases of long-term bonds was expanded to Y19 trillion from Y9 trillion. In addition, Central Banks urprised market again, by stating that according to the bank it will bereasonable to set inflation target at 1%, as economic forecasts are extremelyhazy.
It was Bank's opinion on the target of CPI that forced the market to revise trading strategies for the Yen.
Earlier, trade deficit has been recorded in Japan for the first time in the last 30 years. Exports in the country fell inDecember for the third time, which triggered trade deficit on annual basis. According to the Ministry of Finance, shipments reduced by 8% y/y last month. Budget deficit in Japan amounted to $32 billion (2.49 trillion yen).
Sharp measures of the Central Bank are just a continuation of reaction to statistics: GDP in Japan fell by 2.3% y/y inQ4 2011, since European crisis and slowdown in the world economic rate prevented from recovery after natural disaster. Therefore, pressure on the Bank of Japan, which is planning to hold a meeting on Tuesday, is growing. New measures to support economy are expected from the regulator.
Reasons for decline in GDP in the Country ofthe Rising Sun are on the surface, they are: reduction in global consumptionand after maths of earthquake and tsunami, as well as the flood in Thailand.
However, it is quite possible that Japanese economy will rise by 1.4-1.6% this quarter and will be able to demonstrate growth of 1.7% at the end of this year. IMF gave similar estimates. The head of the Bank of Japan Mr. Shirakawa said earlier that the regulator is prepared to reconsider volume of the asset repurchase program depending on the state of economy.
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