This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The potential tapering of quantitative easing from the US Federal Reserve, which may come as early as September of this year, does tend to add up to a clear long USD/JPY trade, fundamentally speaking. The notion that the BoJ is a small player when up against the mighty Fed in terms of ability to buy bonds tends to test this theory.
Japan’s machinery orders have disappointed the market, declining by 8.8% versus the 8.6% expected. On the positive side, the Corporate Goods Price Index (CGPI) points to inflation; it was shy of the estimate but still implies that the aggressive tactics employed by the BoJ are taking traction.
To resume the overall bullish trend, I’d ideally prefer to see a rise back towards the 99.00 level; this would bring the longer term trend line back into play. For now, I expect that we will find resistance around 99.90/100.00.
Should the 96.50 fail at this juncture, I would expect the 95.00 level to offer support once again.