The Japanese yen weakness on the election victory for Shinzo Abe has added to strength of Japanese Yen- quoted crosses indicating a USD JPY reversal signal as the pair bounced back upfrom its 18-month low of 100 beginning of the week.
Fresh from gaining majority of the seats in the Upper House elections over the weekend, Abe and his political party seem intent on stepping on the gas for their “Abenomics” plan.
BOJ Governor Haruhiko Kuroda is currently meeting with former Fed head Ben Bernanke who is known for using three rounds of QE to pull the U.S. economy out of the financial crisis and recession. Fresh from Japanese News TV, it seems like they have been talking about is “Helicopter Money” which points to printing more money to ensure that the level of money supply stays more or less the same. Rumor has it that
Invest Diva’s who are bearish on Mr. Yen are enjoying the party for now as the prospect of additional stimulus could put downside pressure on the currency’s value. However, this behavior could be short-lived since risk aversion from the Brexit appears to be the dominant market theme these days.
Besides, the issuance of construction bonds in exchange for cash as a means of funding the government’s stimulus package would mean a reduction in the amount of money in banks’ reserves or in circulation, thereby driving the yen’s value higher. According to the Ministry of Finance, the previous fiscal year left only about 250 billion JPY available for additional government spending so they gotta put some serious effort in raising funds.
On the economic calendar today we have Germany’s Consumer Price Index out at 6 AM followed by UK’s Inflation Report Hearings at 9 AM where the Treasury Committee is appointed by the House of Commons to examine the expenditure, administration and policies of associated public bodies including the Bank of England and the Financial Services Authority.
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Later during the New York session Federal Reserve members Tarullo and Bullard will speak at 1:15 and 1:35 PM GMT respectively, which could give traders insights about Fed’s views on Brexit and US interest rate policies.
USD JPY Reversal Signal | Forex Economic Calendar
USD JPY reversal signal – Technical Analysis
The USD/JPY pair bounced up big time on Monday on Japan’s stimulus. The pair formed a strong bullish engulfing at the support of 100. However we need more time to confirm a reversal on the pair as BOJ’s stimulus often don’t really last long.
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