In Japan, Clues on Noda’s Forex Policy

In Japan, Clues on Noda’s Forex Policy
Japan’s new finance minister Yoshihiko Noda has kept his foreign-exchange policy pretty vague since he took office, but his decision to retain former Ministry of Finance currency bureaucrat Toyoo Gyohten as a special adviser may be an indication that Mr. Noda is unlikely to intervene unless in extreme circumstances.

Mr. Gyohten served as vice finance minister for international affairs from 1986 to 1989—a top position for currency bureaucrats. He did intervene during his MOF tenure for sure, but he’s generally considered a less eager interventionist than other former vice finance ministers like “Mr. Yen” Eisuke Sakakibara, “Mr. Dollar” Zembei Mizoguchi.

“Mr. Gyohten is not a big fan of intervention,” is how one of former vice finance ministers had put it. How attentively Mr. Noda would listen to his forex views isn’t clear.

“I’m not going to decide (forex matters) with Mr. Gyohten…Currency policy is under the jurisdiction of the finance minister,” Mr. Noda told Dow Jones in a recent interview. But, “he is my adviser, so I will get reports from him and will listen to his opinions on various situations.”

That suggests Noda is at least not completely at odds with Gyohten on policy matters. Gyohten was hired as adviser by former finance minister Hirohisa Fujii last year, and has been in post since then.

Daily Technical Analysis

EUR/USD Outlook

The EURUSD continued its bearish momentum earlier today in Asian session, hit 1.8882 level and seems comfortable moving below 1.2000 indicating potential bearish continuation targeting 1.1800 before testing 1.1600 this week. Upside risks/correction indicated by a falling wedge formation as you can see on my h4 chart below and the fact that price is in oversold area. This upside pullback scenario is valid only when price breakout above the formation, so until that happen, I am still in bearish mode for this pair. Immediate resistance at 1.2000. Break above that area could trigger further upside pullback testing 1.2150 but the main scenario remains bearish at this phase.

GBP/USD Outlook

The GBPUSD failed to continue its bullish correction on Friday. The bullish channel has been violated to the downside indicating the end of the bullish correction and price ready to continue its major bearish scenario re-testing 1.4240 before targeting 1.4000 area. Immediate resistance at 1.4550. Break above that area could lead us into no trading zone in nearest term but the main scenario remains to the downside

USD/JPY Outlook

The USDJPY failed to continue its bullish scenario on Friday. On h4 chart below we can see that the bullish channel has been violated to the downside indicating bullish failure and potential bearish view at least in nearest term testing 90.50 support area. Break below that area could trigger further bearish pressure re-testing 89.00 region.

USD/CHF Outlook

The USDCHF attempted to push lower on Friday, bottomed at 1.1428 but whipsawed to the upside, closed higher at 1.1616 and keep moving higher around 1.1644 at the time I wrote this comment. Overall price still trapped in range area of 1.1695 – 1.1445 but the nearest pressure seems more to the upside testing the 1.1695 area. Consistent move above that area could trigger further bullish momentum targeting 1.1750 and confirm the bullish continuation scenario.

EUR/JPY Outlook

The EURJPY had a significant bearish momentum on Friday, bottomed at 109.39 after break below the rising wedge formation and continue to push lower earlier today in Asian session, moving below 108.83 area indicating potential further bearish pressure 106.00 even 104.00 area this week. Another upside pullback above 108.83 could trigger further upside correction and lead us into no trading zone in nearest term but the main scenario remains to the downside.

GBP/JPY Outlook

The GBPJPY had a significant bearish momentum on Friday, bottomed at 132.14 and keep moving lower earlier today in Asian session around 131.50 at the time I wrote this comment. The nearest bias is bearish testing the lower line of the bullish channel and 128.89 area but note that as long as price still move inside the bullish channel the bullish correction scenario remains intact. Immediate resistance at 133.20. Break above that area could trigger further bullish pressure

AUD/USD Outlook

The AUDUSD continued its bearish pressure on Friday after failed to break above 0.8550 area which can be seen as nearest term top at this phase, lead us to potential bearish view testing 0.8070 even 0.8000 region. On the upside, only a movement back above 0.8275 could lead us into no trading zone as my technical study would be a mess and activate my wait and see mode.

USD/JPY weekly outlook: June 7-11

USD/JPY weekly outlook: June 7-11
During choppy trade, the yen plummeted against the U.S. dollar last week amid political uncertainty in Japan, before coming back up somewhat on Friday in the wake of disappointing U.S. employment data.

USD/JPY hit 91.85 at the close of trade on Friday, gaining 0.75% on a weekly basis.

Looking forward, the pair is likely to find short-term support at 90.53, the low of June 1, and resistance at 94.98, the high of May 5 and a 9-month high.

This week, Japan is due to publish data on its gross domestic product, as well as reports on lending activity, currency circulation levels, manufacturing productivity levels and economic sentiment.

In the United States, meanwhile, Federal Reserve Chairman Ben Bernanke is set to testify before Congress, and official data is due to be published on retail sales, initial jobless claims, and the U.S. trade balance. The Fed is also due to publish its Beige Book and a report on its budget balance.

Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect USD/JPY.

Monday, June 7

Japan is set to publish data on lending activity by banks, the country’s current account balance and on the volume of money currently in circulation.

In the U.S. the Fed will release a report on U.S. consumer credit, and Fed Chair Bernanke is scheduled to speak at an event in Washington, D.C.

Tuesday, June 8

Japan is due to publish data on core machinery orders, a leading indicator of manufacturing production. Also Tuesday, Japan will produce a report on consumer spending, a key indicator of overall economic activity.

In the U.S., two members of the Federal Reserve's Federal Open Market Committee, Elizabeth Duke and Thomas Hoenig, are due to speak at separate public engagements. A private report on U.S. consumer confidence will also be published.

Wednesday, June 9

Japan is due to release GDP data, the broadest measure of economic activity. The country will also publish a corporate goods price index, a leading indicator of consumer price inflation. Meanwhile, an industry group will release data on machinery tool orders in Japan.

In the U.S., Bernanke, the Fed chief, is due to testify before the House Budget Committee in Washington, D.C., and then speak at an event in Richmond. The Fed will publish its Beige Book, analysis used by the FOMC in making their next interest rates decision.

The U.S. will also publish weekly data on crude oil inventories.

Thursday, June 10

Japan will publish official data on consumer confidence, a key signal of consumer spending.

The U.S. will publish data on its trade balance and release closely watched weekly data on initial jobless claims. Also in the U.S., the government will publish a report on the monthly Federal budget balance.

Friday, June 11

The U.S. will release a report on consumer spending, which accounts for the majority of overall economic activity, and a report on business inventories. The Census Bureau will also release key monthly data on U.S. retail sales, the primary gauge of consumer spending.

Also Friday, the University of Michigan will release the results of surveys on U.S. consumer sentiment and inflation expectations.

USD/JPY - GBP/JPY - GBP/USD

USD/JPY jumps after US economic data
The Dollar rose against the Yen after better-than-expected US economic data. USD/JPY jumped to 91.40 reaching a fresh intra-day high. The pair continues to move away from the 90.50 zone (session low). To the upside resistance levels lie at 91.60 (May 31 high) and above at 91.80 and 92.20.

The Yen is pulling back across the board as risk aversion eases and stocks and commodities recover strength.

The US ISM Manufacturing index fell to 59.7 in May from April's 60.4; remaining above market expectations of a decline to 59.0.

Construction spending in the US surprisingly increased by 2.7% in April, in contrast to flat expectations. What's more, construction widely outpaced March's figure of 0.4%.

GBP/JPY pulls back from 2-week highs
The Pound rose to 134.40 against the Yen during the American session, reaching the highest price since May 18. The pair pulled back afterwards to 133.50 and currently is testing levels above 134.00. Cable strengthened after breaking above an important resistance zone that lie at 133.30.

GBP/JPY currently trades at 133.95/05, 1.07% above today's opening price. The pair is rising for the second day in a row and during the European session the pair tumbled to 130.75, hitting a 3-day low, but so far, has risen almost 300 pips from the lows, after a strong reversal.

GBP/USD hits fresh high at 1.4720
The Pound extended it rally against the Dollar and rose to 1.4720, reaching a fresh 2-week high. The pair retreated below 1.4700 afterwards but is consolidating important gains and has risen 250 pips since the begging of the week.

The upside so far was capped by the 1.4720 zone; above immediate resistance lies at 1.4790. To the downside support levels lie at 1.4640 and below at 1.4600/20 and 1.4550.

"Fresh strength from 1.4399, yesterday's higher low, has cleared 1.4610 barrier today, en-route to 1.4720/33 zone. 1.4437/1.4399 now underpins the advance", Slobodan Drvenica, analyst at Windsor Brokers Ltd. said.