Daily Economic Commentary: Japan

[PipDiddy]

What goes around comes around! While the yen stole another 10 pips from the dollar, it couldn't help but lose 12 pips to the euro. What's in store for yen traders today?

Well, if the first few hours of the day are anything to go by, it looks like the yen will be flexing its muscles against its higher-yielding counterparts. EUR/JPY and GBP/JPY are already down a handful of pips this Tokyo session.

Neither jawboning nor weak Japanese data has been able to stop traders from buying up the yen.

Prime Minister Noda spoke up yesterday to say that he's uncomfortable with the yen's current levels and that it has become a serious problem for Japan. But apparently, the markets think that the government's bark is worse than its bite because they didn't pay much attention to Noda's little warning.

Meanwhile core machinery orders data disappointed as it showed a larger-than-expected decline. Orders slid 3.3% last month, instead of just 2.4%.

If you guys want more Japanese economic figures, you'll have to wait until 11:50 pm GMT today, when the tertiary industry activity report is due for release. Forecasts have the report printing a nice 0.5% rebound following the previous month's 0.8% slide.

[PipDiddy]

Risk appetite once again proved to be the bane of the yen's existence. It failed to extend it's winning streak against the dollar to a fourth day when USD/JPY closed higher at 78.34 after opening at 78.15. Meanwhile, EUR/JPY finished the day 50 pips higher at 101.29.

Positive employment data from the U.S. spurred risk appetite and had traders seeking higher-yielding currencies.

Of course, it also did not help the yen that Japanese Economy Finance Minister Maehara reminded markets yesterday that the country could intervene anytime without the consent of the U.S. If the effect of his threat continues to linger on in today's trading, don't be surprised to see the yen extend its losses.

On top of that, make sure you pay attention to the reports we have scheduled from the U.S. as they could continue to dictate market sentiment.

[PipDiddy]

Friday turned out to be a very uneventful day for the yen as it mainly traded sideways versus most major currencies. USD/JPY, for instance, moved within a very tight 30-pip horizontal range the entire day. The pair opened the Asian session at 78.34 and closed the day barely changed at 78.38.

The absence of economic catalysts was to blame for the yen’s lack of movement. While there were some data points released, like the Tertiary Industry Activity report and the Corporate Goods Price Index, they weren't what I’d consider market-moving.

Japan’s economic calendar this week is pretty light as no tier 1 reports are due. Nevertheless, I think we’ll still see the yen experience a significant amount of volatility since there are a lot of high profile news reports from the U.S. You can check out my U.S. economic roundup for more information.

[PipDiddy]

And the losing continues! For the fourth consecutive day, the yen dropped versus the euro and the pound, as the yen continues to struggle across the board. EUR/JPY rose 34 pips to finish at 101.92, while GBP/JPY ended at 126.44, up 32 pips on the day.

Part of the reason why the yen slumped yesterday was due to a rise in USD/JPY, as the dollar rallied following the release of U.S. retail sales figures. Make sure y’all hit up my USD commentary for the 411 on the retail sales data!

Another reason why the yen tapped out was because of the announcement that Japanese telecom giant Softbank would be buying out Sprint mobile. This will require Softbank to convert its yen into dollars in order to complete the transaction.

Nothing lined up from Japan today, so pay close attention to risk sentiment, as this will most likely be the major driver of yen trading.

[PipDiddy]

Similar to the safe haven Greenback, the low-yielding yen experienced a world of hurt yesterday due to risk appetite. Traders sold the currency in favor of higher-yielding, risk-related currencies like the euro and the pound. EUR/JPY jumped to 102.98 from 101.92 while GBP/JPY surged to 127.16 from 126.44.

The improved market sentiment stemmed from positive euro zone developments. There were rumors that went around yesterday suggesting that Spain might just need a credit line rather than actual funding.

No Japanese data was released yesterday and we won’t be seeing any again today. This means that the yen will probably be driven by market sentiment again and economic releases from other major economies.

[PipDiddy]

The yen got in the loser bandwagon yesterday as the low-yielding currencies took a fast track down the charts. EUR/JPY climbed by another 65 pips yesterday, while GBP/JPY inched 36 pips higher than its open price.

Though there were no economic reports released from the Land of the Rising Sun, the currency bears got busy dragging the yen lower in the charts. As I mentioned in my USD piece, investors were giddy about a potential bailout package from Spain, strong U.S. economic reports, and stronger-than-expected employment numbers from the U.K.

Japan isn’t scheduled to release any reports again today, but keep a close eye on any news report that might affect risk sentiment, aight? My forex spies tell me that China’s economic reports as well as talks of Spain’s bailout might set the tone for risk appetite today.

[PipDiddy]

The Japanese yen got mixed reviews yesterday as it did better than the British pound, got outpaced by the Greenback, and ended in a stalemate against the euro. USD/JPY ended the day at 79.26 while EUR/JPY closed at 103.61.

Japan didn't release any economic figures yesterday, leaving the yen at the mercy of risk sentiment and reports from other major economies. In its scuffle against the safe-haven Greenback, the yen was at a losing end as strong U.S. data gave the dollar an additional boost.

Today, Japan is set to release its all industries activity index at 4:30 am GMT. Although this report isn't expected to have a huge impact on yen price action, it'd help to keep tabs on the actual results as these could give us a good picture of how the Japanese economy is faring.

Also, don't forget that BOJ Governor Shirakawa is set to testify at 6:35 am GMT today. Do you think we'll hear more verbal jawboning this time around? Can't hurt to be extra careful around that time!

[PipDiddy]

No more Mr. Nice Guy! Like its low-yielding comrades, the yen triple roundhouse kicked its high-yielding counterparts last Friday. EUR/JPY dropped by 35 pips while Guppy crashed 58 pips from its intraday high. What gives?

As I mentioned in my USD piece, risk aversion in the markets kept the low-yielding currency bulls happy. But everything doesn’t look so promising in the Land of the Rising Sun.

For one thing, Japan’s leading index showed a 0.1% growth in August, a bit lower than the 0.2% uptick that analysts were expecting. Even BOJ’s Shirakawa added to gloomy prospects by hinting that the economy could contract if Japanese bond yields rise to 2%.

Since the government is holding boatloads of Japanese government bonds, a rise in yields would mean lower prices and less moolah for the government. It is already estimated that a 1% rise in yields would translate to 3.7 trillion JPY worth of losses for the Japanese banks. Yikes!

Let’s see if this week’s data will give investors reason to buy the yen some more. Japan didn’t start the week on the right side of the charts as Japan printed a 0.98 trillion JPY trade deficit in September, double the 0.46 trillion deficit in August.

BOJ’s Shirakawa could provide more light to the BOJ’s plans in his speech today at 12:30 am GMT. After that, the next market mover could come from the Tokyo and national CPI scheduled for release on Thursday at 11:30 pm GMT.

[PipDiddy]

Just another day in the office for the yen! The Japanese currency lost to ALL its major counterparts in yesterday's trading, with USD/JPY inching close to the 80.00 handle and GBP/JPY closing 3 pips shy of the 128.00 handle. Will the yen have a chance to recover today?

Weaker than expected trade balance from Japan triggered a yen selloff yesterday as the actual report posted a 0.98 trillion JPY deficit, wider than the estimated 0.74 trillion JPY shortfall. Note that the September trade deficit is also more than twice as much as the previous month's 0.46 trillion JPY deficit, implying that yen strength during the period was most likely to blame for the drop in trade. Components of the report also revealed that weaker Chinese demand was another culprit in for the wider deficit.

There are no reports due from Japan for the rest of the day, which suggests that the yen could keep reeling from the weak trade balance release. Don't forget to keep close tabs on market events, such as election and bailout updates from Spain, which could have a huge impact on sentiment. Good luck!

[PipDiddy]

If you’re a range trader, then I’m sure you enjoyed USD/JPY’s price action yesterday. USD/JPY, after it had opened the Asian trading session at 79.93, moved horizontally the entire day, finding support at 79.70 and resistance at the 80.00 handle. The pair closed the U.S. trading session at 79.85.

With the USD/JPY’s rally coming to a screeching halt at the critical 80.00 psychological level, does it mean that the pair’s uptrend is about to reverse? With the threat of currency intervention present, this doesn't seem to be the case. For now, watch the pair carefully, as a break of 80.00 could lead another strong bullish rally.

No major data scheduled to be released today so pay attention to U.S. events instead. The FOMC interest rate decision will be the major market mover today, so make sure you listen to it!