Forex Blog
Blog-FX.Com

At the Forex currency market the Japanese Yen rate tries to strengthen on Tuesday, following yesterday’s weakness caused by currency intervention conducted by the Bank of Japan.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is going up steadily in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 78.25, the pair will go to 78.45 and 78.80. If upward breakdown does not take place, the pair will consolidate at the current levels.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released today, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to act promptly. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required.

Thus, long-awaited event took place: the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%. However, current dynamics is not impartial to assess efficiency of the intervention; the intervention in August helped to weaken the Yen for only 24 hours.

According to statistics released earlier this week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

The Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected, at the same time, increasing program of asset purchases to? Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecast in the future. According to the estimates of the Bank of Japan exchange rate of the Yen will remain high for a while, the Bank has not clarified if currency intervention threatens the JPY or not.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

Tags: