USD/JPY Forecast January 23, 2012, Technical Analysis

The USD/JPY pair fell on Friday to remain in the tight range it has been sitting in for two weeks. The pair is simply “stuck”, but this only confirms the “boundaries” of which the short-term trader can trade in. The selling of a break of the Friday candle would be a play to reach the lows of the consolidation again, and something we are interested in doing. Of course, we are only aiming for about 30 pips or so as there is massive support at 76.50 or so. Because of this, we might as well take advantage of the back and forth tight range we are in currently!

USD/JPY Forecast January 23, 2012, Technical Analysis
USD/JPY Forecast January 23, 2012, Technical Analysis

USD/JPY Forecast for the Week of January 23, 2012, Technical Analysis

USD/JPY is currently sitting still, and with the Bank of Japan sitting just below the current levels, this pair simply cannot find any real traction to fall lower. However, the upside seems to be limited as well, as the 0.80 level is massive resistance. The pressure is certainly to the downside, and this looks set to continue going forward. The 0.80 level mentioned above has to be broken in order for the long-term trader to get involved, as the downside is protected by the BoJ. Because of this, we consider the USD/JPY pair a scalpers only market.

USD/JPY Forecast for the Week of January 23, 2012, Technical Analysis
USD/JPY Forecast for the Week of January 23, 2012, Technical Analysis

USD/JPY Weekly Fundamental Analysis Jan. 23-27, 2012, Forecast

Economic Events:  (GMT)

Jan. 24
03:00 JPY Interest Rate Decision
07:00 JPY BoJ Press Conference
15:00 USD CB Consumer Confidence
Jan. 25
15:00 USD Pending Home Sales (MoM)
19:15 USD Interest Rate Decision
19:15 USD FOMC Statement
Jan. 26
05:00 JPY BoJ Monthly Report
13:30 USD Core Durable Goods Orders (MoM)
13:30 USD Durable Goods Orders (MoM)
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
15:00 USD New Home Sales
23:50 JPY Monetary Policy Meeting Minutes
23:50 JPY Retail Sales (YoY)
Jan. 27
13:30 USD GDP Price Index (QoQ)
13:30 USD GDP (QoQ)

Please review the daily forecast for explainations and expected results

Rule:

The USD/JPY foreign currency exchange rate is the price of one U.S. dollar – the base currency – in terms of Japanese yen – the quote currency. For example, a bid/ask quote of 89.29/89.32 means that one U.S. dollar can be bought for 89.32 yen and one U.S. dollar can be sold at 89.29 yen.

If the U.S. dollar is expected to appreciate against the yen, then the above quote might rise to say, 89.73/89.76. The forex strategy in this case would be to buy USD/JPY. If, on the other hand, the U.S. dollar is expected to depreciate against the yen, then the above quote might fall to say, 88.68/88.71. The forex strategy in this case would be to sell USD/JPY.

In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.

Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment.

Daily range average : 80-90 pips
Best time to trade: Asian Session (2400 GMT – 0900 GMT)
Some factors affecting the USD/JPY rate:

  • The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
  • Japanese government intervention to strongen their currency sends USD/JPY lower

 

Analysis and Recommendation:

The USD/JPY was on the upside for the week, closing the week at 77.02.

On the local side, the BoJ has downgraded its assessment of the local economic conditions in seven of nine regions in Japan in January from three months earlier. Also a government minister commented in view of the recent downgrades by S&P, Japan could be next.

The USD was up and down all week, with positive jobs reports and negative housing data, but moved up against all currencies when the euro reached an unexpected high and traders began selling it off to take profits, pushing the dollar up on Friday.

The entire week seemed to be focused on Greece and the negotiations with the IIF representatives as deadlines approached. The were rumors flying in every direction, moving the markets but at the close of day Friday no deal had been reached and the IIF representatives packed up and went home stating the negotiations would continue over the week by phone.

The pair is expected to continue to the upside in the beginning of the week, there are several economic reports due early that could effect the markets, but the main event is the EU and Greece, news, rumor, truth or fiction, will move the markets.

Keep an eye on Gold, as it surged on Friday as investors moved to safe-havens. This week will be about safety and risk appetite.

Upcoming Govt Bond Sales Dates

Jan 23  10:10  Norway  Nok 6.0bn 4.25% May 2017 bond

Jan 23  10:10  Slovakia  Auctions Apr 2014 bond

Jan 23  10:30  Germany  Eur 3.0bn Jan 2013 Bubill

Jan 23  12:00  Norway  Details bond auction on Jan 30

Jan 24  09:30  Netherlands Eur 1.5-2.5bn Jan 2013 & Jan 2042 DSL

Jan 24  09:30  Spain  Auctions 3 & 6M T-bills

Jan 24  16:30  Italy   Details CTZ/BTPei on Jan 26 & BOT on Jan 27 &

Jan 24  18:00  US  Auctions 2Y Notes

Jan 25  10:10  Sweden  Nominal bond auction

Jan 25  10:30  Germany  Eur 3.0bn 3.25% Jul 2042 Bund

Jan 25  16:30  Italy   Details BTP/CCTeu on Jan 30

Jan 25  18:00  US  Auctions 5Y Notes

Jan 26  10:10  Italy   Auctions CTZ/BTPei

Jan 26  18:00  US  Auctions 7Y Notes

Jan 27  10:10  Italy   BOT auction

USD/JPY Forecast Jan. 23, 2012, Fundamental Analysis

USD/JPY Forecast Jan. 23, 2012, Fundamental Analysis
USD/JPY Forecast Jan. 23, 2012, Fundamental Analysis
The USD/JPY pair ended last week with gains, where the pair was able correct to the upside with the improved sentiment in the market that eased haven demand, easing pressure on the Bank of Japan which will announce its rate decision this week.

The current sentiment is supporting the risk appetite where the latest macroeconomic data and eased fears over Europe’s outlook supported the unwinding of pessimism and reduced demand for safe haven currencies.

The USD/JPY pair is expected to continue the upside short-term trend, while any intervention from the BOJ will have its toll on the pair’s movements and could easily confirm the upside move over the mid-term.

On Monday, both economies will not release any fundamentals, where the pair’s movements will depend on the market sentiment.

USD/JPY Weekly Forecast Jan. 23-27, 2012, Fundamental Analysis

USD/JPY Weekly Forecast Jan. 23-27, 2012, Fundamental Analysis
USD/JPY Weekly Forecast Jan. 23-27, 2012, Fundamental Analysis
The USD/JPY pair advanced to its highest level in three weeks, as the risk appetite dominated the FX market with good global macroeconomic data and eased worries over the outlook for Europe with successful bond sales.

Investors returned to take some risk sending major equity indices to record more gains, while safe haven currencies paid the price and dropped against other majors.

The current market sentiment shifted to riskier assets, as the recent data from the U.S. economy and China supported the idea that the ongoing recovery in the major economies will balance the negative affect of the EU debt crisis.

The Bank of Japan will announce its interest rate decision with the beginning of the week, where the central bank will be happy with current drop in the Japanese currency, while the ongoing EU debt crisis and uncertain outlook for the global economy will keep the BoJ cautious.

Also the Federal Reserve Bank will announce its FOMC decision, with expectations of further stability in the bank’s monetary policy especially after the unexpected performance of the manufacturing sector in addition to stable inflation pressures.

The USD/JPY pair is expected to continue the upside over the short-term, while any intervention from the BoJ will have its toll on the pair’s movements and could easily confirm the upside move over the coming period.

Major highlights for this week that will affect the USD/JPY pair’s trading:

Monday January 23:

On Monday, both economies will not release any fundamentals, where the pair’s movements will depend on the market sentiment.

Tuesday January 24:

On Tuesday at 04:00 GMT, the Bank of Japan will conclude its first meeting this year, where it’s expected that the BOJ will keep its interest rate unchanged while the stimulus programs could witness some adjustments.

At 15:00 GMT, the U.S. economy will issue the Richmond Fed Manufacturing Index for January, where it’s expected at 5.0 from the previous reading of 3.0.

Wednesday January 25:

On Wednesday at 23:50 GMT (Tuesday), Japan will release the Merchandise Trade Balance for December, where it’s expected to show a deficit of 154.9 billion yen narrowing from the previous deficit of 684.7 billion yen.

The Adjusted Merchandise Trade Balance is expected to show a deficit of 376.5 billion yen also narrowing from the previous deficit of 537.9 billion yen.

Exports are expected with 7.4% drop on the year deepening the drop from the previous month when it fell 4.5%. Imports are expected with 8.0% rise after 11.4% rise the previous month.

The U.S. economy will report the House Price Index for November which had a previous reading of –0.2%. On the other hand, the Pending Home Sales for December is expected with 1.0% rise slowing from the previous month’s surge of 7.3%.

At 17:30 GMT, the Federal Reserve Bank will announce its Open Market Committee monetary decision, where it’s expected that the central bank will keep its interest rate near zero and the monetary policy unchanged.

Thursday January 26:

On Thursday at 13:30 GMT, the U.S. economy will release the Durable Goods Orders for December, where it’s expected at 2.0% from the prior reading of 3.8%. While the Durables Exclude Transportation had a previous reading of 0.3% expected at 1.0%.

At 13:30 GMT, the U.S. economy will release the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance dropped to 352 thousand last week.

The U.S. Leading Indicators for December will be released at 15:00 GMT, with a previous reading of 0.5% and expected to come at 0.7%.

On the other hand, the New Home Sales for December is expected to come at 1.6% in line with the prior reading.

Friday January 27:

On Friday at 23:30 GMT (Thursday), Japan will release the National Consumer Price Index for December, where it’s expected to drop 0.2% from the prior reading of –0.5%, while the National Consumer Price Index excluding fresh food is expected to come at -0.1% from –0.2%.

At 23:50 GMT, the Japanese Retail Trade for December will be released with a prior reading of 0.4% and expected to come at -2.1%, while the annual reading has a prior reading of –2.3% and expected to come at 0.4%.

The U.S. economy will release the annualized Gross Domestic Product for the fourth quarter at 13:30 GMT, where the U.S. economy is expected to have expanded at a stronger pace of 3.0% from the previous 1.8%.

The Core Personal Consumption Expenditure for the fourth quarter is expected to come at 0.9% from the previous 2.1%, while the fourth quarter Personal Consumption is expected to come at 2.3% from the previous 1.7%.

The University of Michigan Confidence for January will be released at 14:55 GMT, with a previous reading of 74 and expected to be revised slightly to 73.9.

Markets Witness Mixed Trading after IMF Cuts Global Growth for 2012

US dollar managed to incline against most of major currencies as a report came from The Daily Telegraph today saying that the IMF will downgrade the global growth outlook for 2012 to 3.3% from 4.0%.

The IMF sees a 2.2 percent contraction for Italy and a 1.7 percent growth decline for Spain, as economies are weighed down by fiscal austerity measures, The IMF also urged the European Central Bank to boost liquidity to stave off a deeper Euro zone crisis.

While on the other hand, some major companies and banks in U.S announced their earnings reports for the fourth quarter, where Google and General Electric failed to reach markets expectations, affecting the performance of Stocks during Friday’s session.

In Europe, CAC 40 dropped nearly 0.04%, while DAX inclined by 0.14%, while in US, Dow Jones rose nearly 0.23%, S&P 500 dropped by 0.32%, and NASDAQ declined by 0.34%.

In Currencies market, the euro declined against USD trading around $1.2909 compared with opening levels at $1.2967, as demand for Euro decreased today, while the pound rose trading at $1.5517.

The USD gained some momentum today trading around the 80.28 level, while the USD/YEN pair inclined to trade at 77.13. The AUD/USD pair jumped trading around the 1.0457, where gold dropped trading around $1653.24, and oil declined also trading at $100.29.

USD/JPY Fundamental Analysis Jan. 23, 2012, Forecast

Close of the Asian Session

Economic Events: (GMT)

Chinese Markets are closed for the Lunar New Year

Jan. 22  18:50   JPY Trade Balance

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

A higher than expected reading should be taken as positive/bullish for the JPY, while a lower than expected reading should be taken as negative/bearish for the JPY.

19:30 AUD PPI (QoQ)

The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.

A higher than expected reading should be taken as positive/bullish for the AUD, while a lower than expected reading should be taken as negative/bearish for the AUD.

Jan. 23  22:00 JPY Interest Rate Decision

Bank of Japan (BOJ) policy board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive/bullish for the JPY, while a lower than expected rate is negative/bearish for the JPY.

Analysis and Recommendation:

USD/JPY was trading 77.13 with the USD lower against the Japanese Yen on Friday

The pair seem to be in hibernation this week. What little life they have shown has been in reaction of EU, and the greenbacks overall market activity. The BoJ is scheduled to make a statement on Monday, but no changes are expected. The policy decision is forecast to be a hold.

Upcoming Govt Bond Sales Dates

Jan 23  10:10  Norway  Nok 6.0bn 4.25% May 2017 bond

Jan 23  10:10  Slovakia  Auctions Apr 2014 bond

Jan 23  10:30  Germany  Eur 3.0bn Jan 2013 Bubill

Jan 23  12:00  Norway  Details bond auction on Jan 30

Jan 24  09:30  Netherlands Eur 1.5-2.5bn Jan 2013 & Jan 2042 DSL

Jan 24  09:30  Spain  Auctions 3 & 6M T-bills

Jan 24  16:30  Italy   Details CTZ/BTPei on Jan 26 & BOT on Jan 27 &

Jan 24  18:00  US  Auctions 2Y Notes

Jan 25  10:10  Sweden  Nominal bond auction

Jan 25  10:30  Germany  Eur 3.0bn 3.25% Jul 2042 Bund

Jan 25  16:30  Italy   Details BTP/CCTeu on Jan 30

Jan 25  18:00  US  Auctions 5Y Notes

Jan 26  10:10  Italy   Auctions CTZ/BTPei

Jan 26  18:00  US  Auctions 7Y Notes

Jan 27  10:10  Italy   BOT auction

USD/JPY Forecast January 20, 2012, Technical Analysis

USD/JPY rose during the session as the risk appetite in the markets overall improved. The level that the pair rose from is massive support, and the pair reacted as we had anticipated. The real question is going to be whether or not it can continue to gain going forward. The pressure to the downside is significant, and as a result we are somewhat cautious going long unless it is closer to 76.50 where we feel the Bank of Japan starts to pay attention. In this pattern though, we are willing to buy pullbacks on a shorter-term charts. We will not sell at this point in time.

USD/JPY Forecast January 20, 2012, Technical Analysis
USD/JPY Forecast January 20, 2012, Technical Analysis

Markets Filled with Optimism after Upbeat U.S Jobless Claims

Markets faced a cheerful trading after the upbeat jobless claims, as the number of Americans filing for unemployment insurances dropped by 50 thousand to 352 thousand last week, from a revised 402 thousand, the lowest in almost four year and beating analysts’ median estimates of 384 thousand. noting that markets were filled with optimism after the Spanish and French auction which came better than they targeted, .

The sentiment improved in the market today after the Spanish and French bond auctions, as Spain sold 3.009 billion Euros of 5.85% 2022 bonds, on an average yield of 5.403%, compared with the previous of 6.975% recorded in the November auction. Demand for these bonds was 2.17 times the quantity offered compared with 1.54 times an auction earlier.

In Europe, CAC 40 jumped 1.96%, while DAX inclined by 0.97%, while in US, Dow Jones rose nearly 0.25%, S&P 500 inclined by 0.49%, and NASDAQ rose by 0.80%.

In Currencies market, the euro inclined against USD trading around $1.2923 compared with opening levels at $1.2862, as demand for higher yielding assets increased somehow, while the pound rose trading at $1.5473.

The USD lost the momentum today trading around the 80.23 level, while the USD/YEN pair inclined to trade at 77.20. The AUD/USD pair declined trading around the 1.0404, where gold dropped trading around $1652.95, and oil declined also trading at $100.75.

USD/JPY Forecast Jan. 20, 2012, Fundamental Analysis

USD/JPY Forecast Jan. 20, 2012, Fundamental Analysis
USD/JPY Forecast Jan. 20, 2012, Fundamental Analysis
The USD/JPY pair traded within the same range that dominated the pair’s movements in three weeks, where both the dollar and the Japanese yen are still losing grounds against other majors.

The Japanese yen retreated against the euro and higher-yielding currencies sue to the risk appetite that returned to the financial market.

On the other hand, the greenback maintained its two days decline against its major counterparts, where sings of recovery from the U.S. economy supported confidence between investors which reduced demand for safe haven currencies.

Rumors that the IMF is about to increase its resources by $600 billion in order to help the fight against the debt crisis supported the euro to record more gains against the dollar, while the rally in the Asian stocks helped restore confidence in the global market.

On Friday at 04:30 GMT, the Japanese economy will release the All Industry Activity Index for November, where the prior reading was 0.80% and it’s expected to come at –0.9%.

At 05:00 GMT, Japan will issue the Coincident Index for November, where the previous reading was 90.3; on the other hand the Leading Index for November had a prior reading of 92.9.

The U.S. economy will report the Existing Home Sales for December, where it’s expected with 3.7% rise to 4.65 million from 4.42 million.

Euro advances on IMF and Greece, ahead of France’s and Spain’s bond auctions

Markets are rising quietly ahead of the France’s and Spain’s bond auctions on hopes Greece will soon reach an agreement with bondholders while the International Monetary Fund considers expanding its lending resources to help the euro-zone countries fight the debt crisis.

The IMF is seeking to expand its lending resources by $500 billion yet the U.S. and other countries rejected the idea, considering that the Europe must solve this problem with its own money. Meanwhile Greece might reach an agreement with bondholders over the size of the losses to avoid a messy default.

The upbeat earnings report from Goldman Sachs and EBay helped keep sentiment positive, while earnings from Bank of America, Morgan Stanly, Google, Microsoft and Intel will keep investors cautious, especially after the New York based Kodak filed for bankruptcy as consumers turned from film to digital technology.

Asian stocks advance today on IMF and China, as world’s 2nd largest economy considers easing the capital requirements and is letting its five biggest banks boost lending to avoid hard landing risks. Nikkei 225 rose 1.04% yet the S&P/ASX 200 fell 0.07% after Australia’s employment unexpectedly fell in Dec.

In Europe shares advanced on Greece and IMF hopes ahead of the France’s and Spain’s long-dated bond auctions. Portugal’s yields fell yesterday after a successful auction easing some of the worries ignited since S&P’s mass debt rating cuts in Europe. DAX rose 0.04% while CAC 40 gained 0.49%.

Today the ECB will release its monthly report, while the US will be releasing its CPI index, the housing starts and building permits data along with the weekly jobless claims, Philly index and EIA crude oil inventories. In Europe, France will sell 9.5 billion euros of debt while Spain will sell 4.5 billion euros of bonds.

The euro is seeing some gains trading around 1.2888 while the pound is trading with a slight upside momentum around 1.5437. The dollar index is slightly falling trading around 80.36, while the yen is strengthening trading around 76.70. The AUD is weakening following the jobs data trading around 1.0395.

As the US dollar lost its appeal commodities found support for another day where crude is trading with gains around $101.65 compared with the lowest at $101.01 while gold is around $1665.20 from the lowest at $1655.80 as eyes are on Europe.

USD/JPY Forecast January 19, 2012, Technical Analysis

USD/JPY fell for the session on Wednesday as the Dollar got sold off in general. The pair currently is sitting on top of a nice support area at 76.50 level and the market simply hasn’t moved much over the last couple of weeks.

The Bank of Japan is always a threat to intervene, and as a result selling isn’t going to be an option at this level. The market could be bought if we see a break higher as there is an automatic backstop because of the BoJ. The 78.25 level seems to be the top of the range, so we would only get involved in this pair for a short term trade as the market is so tightly wound at this point.

USD/JPY Forecast January 19, 2012, Technical Analysis
USD/JPY Forecast January 19, 2012, Technical Analysis

USD/JPY Fundamental Analysis Jan. 20, 2012, Forecast

Close of the Asian Session

Economic Events: (GMT)

Jan. 19

13:30 USD Core CPI (MoM) 0.10% 0.20%

The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

13:30 USD CPI (MoM) 0.20% 0.00%

13:30 USD Initial Jobless Claims 385.00K 399.00K

13:30 USD Continuing Jobless Claims 3590.00K 3628.00K

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week.

Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.

A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD.  If the report comes in under the 385K we can expect to see the USD fall against the Yen, but if the report is at the 399K level or above expect to see the USD rally and trend upwards on solid economic news.

Analysis and Recommendation:

Levels of Support and Resistance can be found today at:

S:            76.456   76.5555  76.674                 
Pivot:    76.7735
R:            76.892   76.9915   77.11

USD/JPY was trading at 76.76

The USD/JPY closed almost at the open today, moving very little. The duo seem to have been sleeping all week. What little life they have shown has been in reaction of EU.

In the news a comment from a Goldman exec said that the JPY is probably 25% overvalued and Japan’s days of trade and current account surpluses “look to be finished”. Even the Japanese Minister joined the crowd, stating it is difficult at this moment to find an FX level for the JPY similarly to the Swiss Franc. The markets and currencies are all skewed by the EU crisis.

The two will most likely trade in this range for the rest of the week. Watch the US jobs reports, this could be the kickstart the USD needs to rally, but at this writing all looks calm.

Mix Trading in Market Despite Cheerful German Bond Auction

Mix Trading in Market Despite Cheerful German Bond Auction
Mix Trading in Market Despite Cheerful German Bond Auction
Markets turn mix despite the German and Portuguese bond auction that showed an incline in demand, and that made investors to buy more Euros, so the euro rose against US dollar, while stocks in Europe went red.

The euro advanced sharply against the U.S dollar after the International Monetary Fund said that it could expand its capacity to 1 trillion dollars from 385 billion dollar in order to support the global economy and prevent the debt crisis from spreading outside the euro-area region.

The German successful bond sale also added positivity to the market and supported the euro to hold onto the gains despite the government’s act of revising growth forecasts.

In Europe, CAC 40 declined nearly 0.30%, while DAX inclined by 0.30%, while in US, Dow Jones rose nearly 0.35%, S&P 500 inclined by 0.45%, and NASDAQ rose by 0.76%.

In Currencies market, the euro inclined against USD trading around $1.2809 compared with opening levels at $1.2735, as demand for higher yielding assets increased somehow, while the pound rose trading at $1.5402.

The USD lost the momentum today trading around the 80.74 level, while the USD/YEN pair returned to opening levels to trade at 76.79. The AUD/USD pair inclined trading around the 1.0393, where gold rose trading around $1655.84, and oil dropped trading at $100.23.

USD/JPY Forecast Jan. 19, 2012, Fundamental Analysis

USD/JPY Forecast Jan. 19, 2012, Fundamental Analysis
USD/JPY Forecast Jan. 19, 2012, Fundamental Analysis
The USD/JPY pair dropped for the third day, where the US dollar and the yen continued to lose ground against other majors, giving the higher-yielding currencies a chance to recover from previous losses.

The U.S. economy is showing many signs of recovery in different sectors, which could reflect negatively on the greenback as a safe haven, where investors will increase their appetite for risky assets.

On Thursday at 13:30 GMT, the U.S. economy will release the Consumer Price Index for December, where the prior reading was 0.0% and it’s expected to come at 0.1%. The annual CPI had a prior reading of 3.4% and expected to come at 3.1%.

The Housing Starts for December will be released also at 13:30 GMT, where the previous reading was up by 9.3% at 685 thousand, and expected to remain unchanged at 685 thousand. The U.S. Building Permits are expected with 0.7% drop to 675 thousand from the prior reading of 681 thousand.

The weekly initial claims are also due at the same time, where the number of people filing for first-time claims for the state unemployment insurance increased to 399 thousand last week.

Markets Led by Improved Optimism Over Greece

Markets were cautious after in UK the unemployment rate hit a 17-years high at 8.4%, while the World Bank cut its growth forecasts by the most in three years, yet after the IMF said it could propose expanding its lending resources by $1 trillion, sentiment turned positive.

The World Bank said the world economy will grow 2.5% this year compared with June’s estimate of 3.6%, while the euro area may contract 0.3% from a previous estimate of a 1.8% gain. Yet markets had a muted response just like the reaction to S&P’s downgrade to the EFSF’s rating.

Sentiment found more support as Greek Prime Minister will resume negotiations with bondholders as the country is close to reaching an agreement over the size of the losses to be bared by the creditors. Meanwhile Portugal will sell 2.5 billion euros of debt while Germany will sell 4 billion euros of bonds.

After the US manufacturing expanded by the fastest pace in 9 months while the German investor confidence jumped the most on record yesterday, investors will focus on today’s data as well, as the US industrial production is expected to rebound in Dec. after falling for the first time in seven months in Nov.

The PPI in the States is expected to fall, while in UK the unemployment rate hit a 17-years high deepening concerns Britain is heading for another recession. Most Asian stocks advanced today on positive economic data, where Nikkei 225 gained 0.99% while Hang Seng gained 0.30%.

In Europe shares advanced following the string auctions from Europe and the IMF proposal to expand its lending resources where DAX gained 0.74% while CAC 40 gained 0.70%. The euro is enjoying strong gains trading around 1.2830 while the pound is trading with upside momentum around 1.5375.

The yen was a bit stronger trading around 76.75, while the AUD is gaining trading around 1.0405. As the US dollar lost its appeal commodities found support today where crude is trading with gains around $101.25 compared with the lowest at $100.52 while gold is around $1655.50 as eyes are on Europe.

USD/JPY Fundamental Analysis Jan. 19, 2012, Forecast

Close of the Asian Session

Economic Events:

Jan. 19

08:30   USD   Core CPI (MoM)   0.10%   0.20%

The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

08:30   USD   CPI (MoM)   0.20%   0.00%

08:30   USD   Initial Jobless Claims   385.00K   399.00K

08:30   USD   Continuing Jobless Claims   3590.00K   3628.00K

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week.

Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.

A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD.  If the report comes in under the 385K we can expect to see the USD fall against the Yen, but if the report is at the 399K level or above expect to see the USD rally and trend upwards on solid economic news.

23:30   JPY   All Industries Activity Index (MoM)   -0.70%   0.80%

The All Industries Activity Index measures the monthly change in overall production by all sectors of the Japanese economy. The index closely follows Japanese gross domestic product (GDP) and overall growth figures.

A higher than expected reading should be taken as positive/bullish for the JPY, while a lower than expected reading should be taken as negative/bearish for the JPY.

Analysis and Recommendation:

Levels of Support and Resistance can be found today at:

S:1: 76.5800 |S2: 76.4185 |S3: 76.2210 |R1: 76.9390 |R2: 77.1365 |R3: 77.2980

USD/JPY was trading at 76.70, down at time of writing.

Earlier, economic reports indicated that Industrial production dropped more-than-expected to a seasonally adjusted -2.7% last month from -2.6% in the preceding month

This pair is continuing to trade in a tight range, the long term view is that the duo will be range bound for sometime. I would rate this a neutral. Go somewhere else to earn trade, if the dollar rallys on economic data, it might push the yen down, but at this time, we expect the reports to come in close to forecast or below. Not enough to move the markets.

USD/JPY Forecast January 18, 2012, Technical Analysis

USD/JPY fell for most of the session on Tuesday, but managed a bounce to form a hammer just above the now obvious support area at 76.50 or so. The level is the bottom of recent consolidation going up to roughly 78.25, and it looks like it is getting some kind of support over and over.

The Bank of Japan has intervened in this market a couple of times over the last year and in quite spectacular fashion. However, there are also a lot of whispers in the market about possible clandestine buying by the central bank as well. If this is true, then obviously 76.50 seem to be a likely candidate for that move. The truth is, the reasoning for the support doesn’t matter, and just that it is there.

The situation around the world has people looking for safety, and the US dollar is often the main vehicle for that kind of trade. However, against the Yen it is a different story as so many banks borrow their money to trade in Yen as the interest rates are so low. As they leave the markets, they will have to reconvert their currency back into Yen in order to pay off these loans.

As for money flowing the other way, the Japanese are quite desperate to see the pair rise as it can help keep Japanese products cheap for American consumers. In fact, Sony has said several times over the recent past that the currency rates are severely cutting their ability to make money in North America and beyond.

Looking at the chart, we are willing to buy a break of the top of Tuesday’s range as a sign of bullishness building up. The b ounce could very well see the market rising back to the top of the recent range, setting our target as high as 78.25 or so. However, on the break – we would be happy to take profits at closer levels as this pair is so obviously manipulated presently.  Scalping for small gains has been very profitable over the last several months, and this should continue to be the case.

USD/JPY Forecast January 18, 2012, Technical Analysis
USD/JPY Forecast January 18, 2012, Technical Analysis

A Quick Summary Of Today’s EU And US Markets

U.S. stocks turned cautious on financial sector earnings ahead of Citigroup Inc.  After climbing 151 points, the Dow Jones Industrial Average closed at 12,482.22, up 60.16 points, or 0.5%. The S&P rose 4.57 points, to 1,293.66. The Nasdaq was up 17.41 points, or 0.6%, to 2,728.08. 

The biggest driver of the market is the relative success of European sovereign debt auctions, and the story there is the stealth quantitative easing that is happening with the low-cost money going from the European Central Bank to European banks, which then can use the funds to purchase sovereign debt.

It’s the Merkozy carry trade, a reference to German Chancellor Angela Merkel and French President Nicolas Sarkozy, the combined force behind the European Union’s efforts to stem the euro-zone’s debt crisis.

Also helping the markets were results from China. Government figures pointed out that the slowdown in that nation’s economic growth in the fourth quarter of 2011 to have been less than thought, with Beijing showing a growth rate at 8.9%.  Chinese GDP data are surprisingly reliable in being slightly better than expected; these numbers should support the case of an emerging markets soft landing.

Earlier in the day, EU markets climbed for a second day first based on the Chinese GDP figures and then supported by positive economic news from Germany inspired an asset rally. The ZEW indicator of economic sentiment leapt 32.2 points in January to reach minus-21.6 points, marking its highest level since July 2011. The indicator was at minus-53.8 points in December. The increase suggests that German economic activity is likely to stabilize over the next six months rather than deteriorate.

The Stoxx Europe 600 was up 0.9% to end at 253.27. In France, the CAC-40 jumped 1.4% to 3,269.99, while in Germany, the DAX 30 climbed 1.8% to 6,332.93, and the UK’s FTSE 100 gained 0.7% to 5,693.95