ForexGen Analysis Of USD/JPY

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USD/JPY: STILL VULNERABLE

The Japanese Yen crosses rallied today, but we do not believe that the recovery will last.

Stocks are off their highs and the sharp rise in volatility indicates that investors are still risk averse. In times of uncertainty, we tend to see the low yielders outperform and in this case that would be the Japanese Yen and Swiss franc.

Year to date, the Japanese Yen has strengthened against all of the G10 currencies with the most predominant strength seen against the New Zealand dollar. Japanese economic data was mixed with the corporate goods price index falling, the trade surplus narrowing but leading indicators improving. Since the CGPI index is a measure of inflation, the drop indicates that relief is also coming to Japan with prices easing. Machine orders are due for release this evening and they are expected to drop for the second month in a row.

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