GrowthAces.com trading position on the USD/JPY: We remain long at 104.90, stop-loss moved to 105.90 from 105.30 previously
- Bank of Japan Deputy Governor Kikuo Iwata is the opinion that the economy can recover from a deep slump, saying that households and companies will boost spending as the pain from an April sales tax hike eases. He acknowledged that weak exports and the rising burden on households from the tax hike were among risks to the outlook, but said a pick-up in global demand and wages will keep the economy on track for a moderate recovery. He said also that there was no strong historical correlation between the JPY and price moves. In his view inflation will not slow as the boost from the weak JPY begins to fade. Iwata added a weak JPY was still beneficial for exports, but conceded that the currency effect has probably become less influential now than in the late 2000s as many Japanese firms shifted production overseas.
- Japan's core machinery orders rose for a second straight month in July. The growth amounted to 3.5% mom vs. median forecast of 4.0% mom and rise of 8.8% in June. However, following large falls in April and May, orders remain much lower than they were earlier this year. The data showed orders from manufacturers for new machinery rose 20.3% mom in July - thanks to the big order from a chemicals producer - while those from non-manufacturers fell 4.3% mom. Compared with a year earlier, core orders, which exclude ships and those from electronic power companies, rose 1.1%.
- A strong decline was recorded in foreign machinery orders in July that no longer surpass domestic orders (as in April and June).
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- Japanese wholesale prices rose 3.9% in the year to August vs. a 4.3% increase in July.
- The USD/JPY went higher again. We expect further gains on this pair. We remain long at 104.90 with the target of 107.50. We have move our stop-loss to 105.90 from 105.30 previously. Let us look at the technical situation. The tenkan and kijun lines are positively aligned increasing the upside potential. The nearest resistance level is at 107.03 (daily high, September 25, 2008) and the nearest support is at 106.04 (session low, September 10).
Significant technical analysis' levels:
Resistance: 107.03 (high Sep 25, 2008), 107.25 (high Sep 22, 2008), 108.04 (high Sep 19, 2008)
Support: 106.04 (session low Sep 10), 105.95 (low Sep 9), 105.37 (hourly low Sep 8)