Yen weakened post Trade Balance and Current-Account data, which saw USD/JPY rose above 89.0 briefly. Trade Balance came in at -¥847.5B, almost double from previous month -¥450.3B but still within reasonable distance from analysts expectations of -¥832.0B. On the other hand, Current Account showed -¥222.4B, the first deficit in 10 months, blowing expectations of a ¥20-30B deficit out of the water. In comparison, last month’s data is standing at positive ¥376.9B.
5 minutes Chart
Though this series of announcements brought Yen marginally higher, the true bullishness of USD/JPY actually came a few hours before, towards the closing of US Markets. Price rallied significantly above Weekly Resistance of 88.70, and continued towards 89.0 without any scheduled news releases. A simply plausible reason would be speculators “front running” the Stimulus Package approval which would happen a few hours later. This theory has legs to run considering that Yen actually strengthened AFTER the 10.2T Package was announced, alluding to a common case of “buy the rumor, sell the news” sort of behavior that we’ve seen most of the time before any Central Bank actions. In fairness though, the 10.2T package is a disappointment after numerous big wigs from Japan bigging it him, throwing words like “largest”, “significant”, “strong” etc. Well, in a sense they are right; 10.2T is the largest stimulus package they have embarked since the financial crisis. Yet, this doesn’t really feel like the shock and awe we were preparing for, as this “largest” package remains in the same magnitude as previous stimulus attempts. This amount is tiny when compared to US’s QE1, 2 and 3 operations. Consensus is that Japan’s economic size is somewhere between 30-40%, however this 10.2T ( ~$114B) does not match even after taking that into consideration. The bottomline is simple, Japan appears to be doing the same thing in the past, perhaps just placing a little bit more effort compared to before. Will it work? Previous attempts didn’t. Will the extra effort make the difference? Only time will tell.
Regardless, most if not All of Yen G7 crosses have all cleared their Hourly resistance as what the following charts (not exhaustive) demonstrate:
These 4 charts resembles each other closely, showing that their common denominator: Yen, is pulling the strings in terms of shaping these charts. That would also mean that, should we see USD/JPY coming back down – as it is threatening to do right now, it will be easy to see Yen crosses dropping back to the various support again.
It is not all doom and gloom for Yen bears though, as seasonality has shown that Yen tends to weaken during Feb – Mar, in line with Japanese Year End, this also imply that, though the stimulus package may not be as strong as what we would want it to be, Yen’s strength could still be limited from now till Feb, before seasonality kicks it once more.
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