Yen’s Fortunes Changing?
???? Today’s Spotlight Market
The Japanese Yen has been on a roller coaster ride in recent months, going from a maligned currency to one of the hottest over the past month. The question now becomes whether traders are truly optimistic about the fortunes of the Japanese economy, or if the recent bullish sentiment is simply the product of the Yen being oversold.
Certainly, some traders were expecting the BoJ to fire up the printing presses, which made yesterday’s announcement that there will be no further expansion of the monetary base in the near-term a surprise. Technically, the Yen has made some progress by trading above the major moving averages. The real test for the market may come at the 1.0800 level.
???? Fundamentals
Japanese Yen futures continue their recovery, after the Bank of Japan decided against expanding its stimulus efforts. The BoJ sees the Japanese economy improving and would rather keep the possibility of additional easing in its back pocket in the event that it is needed down the road.
It is important to note that the central bank is not eliminating stimulus, but rather not expanding it any further. The BoJ believes that it can achieve its current target inflation rate of 2 % by boosting the monetary base by ?60 trillion to ?70 trillion annually.The Yen seems to once again be gaining traction as a defensive currency, and may steal some of the greenback’s thunder in this regard.
There is a bevy of important US economic data today and tomorrow, including claims data, retail sales, industrial production and University of Michigan sentiment. Disappointing US data could drive the Yen higher. Regardless, the data is expected to add to market volatility.
???? Technical Notes
Turning to the chart, we see the continuous Japanese Yen forming a bottom near the 0.9700 level. Prices have moved briskly higher in recent sessions, resulting in the Yen crossing the major moving averages.
Prices closed above the 100-day moving average yesterday, and are well above the average in early trading. The recent gains have resulted in overbought levels on the RSI, which could curb further advances in the near-term.
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