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.
An impressive November jobs reports was accompanied by revisions to the previous couple of months and has really spurred the greenback. USD/JPY remains the most interesting pair and continues to power ahead to levels not seen since July 2007. It is a big week for Japan as we head to Sunday’s lower house elections. Diverging fundamentals for the US against everything else really have driven some astonishing runs for the US dollar index as it comes within striking distance of 90.
USD/JPY rallied to a high of ¥121.85 and remains fairly close to that level to start off the week. There has already been some data out of Japan with the second GDP estimate released. The first estimate showed Japan had slipped into a recession and some analysts were expecting a mild recovery in this reading. However, this proved not to be the case as the reading showed a 1.9% contraction, much worse than the initial estimate.
While this didn’t have too much of an impact on the yen, it certainly means more will have to be done to spur a recovery. As far as the elections are concerned, traders will be hoping the coalition secures an absolute majority, which is at least 270 seats. This would be enough to drive further gains for the pair.
Price-action wise, the high from June 2007 of ¥124.14 is a potential target if this run keeps going. A concern is that the pair is massively overbought at the moment, but any pullbacks will only provide another opportunity to buy.