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Will USD/JPY Make a Run to 95.00?

Last updated 1/7/2010 5:22 AM ET (GMT -5) 4 Comments

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• China Unexpectedly hikes 3 month bills sending Shanghai lower
• Japan's FinMin Kan - we want weaker yen
• Both Nikkei and Europe lower by 50bps - weak German Retail sales weigh
• Oil at $82.50/bbl
• Gold higher to $1132/oz.

Overnight Eco

• AUD Retail Sales much stronger at 1.4% vs. 0.4% eyed
• AUD Trade Balance -1.70B vs. -1.79B
• NZD Trade Balance -269M vs. -397M
• CHF CPI -0.2% vs. 0.1%
• EUR Retail Sales -1.2% vs. 0.0%
• EUR Consumer Confidence -16 as expected
• EUR German Factory Orders n/a
• GBP BoE Rate Decision n/a

Event Risk on Tap

• USD Unemployment Claims
• CAD Ivey PMI

Price Action

• USD/JPY spikes to 92.80 on comments by Kan
• AUD/USD falls to 92.00 despite much better Retail Sales
• GBP/USD mired below 1.6000 ahead of BoE
• EUR/USD runs into resistance at 1.4400 as Retail Sales disappoint

The yen was the mover of the night after comments by new Finance Minister Naoto Kan sent the pair  higher in lend of the day Asian trade. Mr. Kan, who has just taken over the post from Hirohisa Fujii wasted no time in making his sentiments known by stating that he wants to see the yen weaken adding that many Japanese firms would prefer to have USD/JPY trade at 95.00 or better.

His comments instantly sparked a rally in USD/JPY which rose nearly 70 points on the news. However the pair stalled ahead of the 93.00 figure as export orders capped the move.  The upside move  may see more follow  through in North American session but we believe  interest rate expectations will be the real driver of trade in the pair over the long term. As we noted earlier, “Ultimately yen’s strength or weakness will likely be determined by the economic progress in US and its impact on the short Treasury yield curve.”

Meanwhile the action was much more lackluster in the EUR/USD with the pair failing to hold 1.4400 once again after German Retail sales missed their mark by a wide margin. German sales dropped -1.1% versus forecasts of 0.4% while the prior month was revised lower to 0.0% from 0.5% reported initially. This is the third month out of the  past four to see negative results, suggesting that despite a relatively better than expected labor situation in Eurozone’s largest economy, the consumer remains moribund threatening to dampen growth in 2010.     

In North American trade the focus will rest on the weekly jobless claims numbers as the final indicator leading up to tomorrow’s, NFP report. The market expects a back up to 4449K from the 432K print the week prior, but if the data surprises to the upside nearing the key 400K barrier, the overnight rally in USD/JPY could extend above the 93.00 handle as traders position themselves for a strong NFP.

A report by equity research house Stifel Nicolaus  suggests that  the seasonal adjustment skew in the BLS model could result in a higher than expected reading  this Friday and although  such statistical adjustments could temper some of the optimism regarding the US economy,  it should nevertheless translate into positive price action for the greenback especially against  the yen

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Comments (4)

bojan

January 07, 2010 at 06:22 AM ET

JPY has tendency to show strenght when it is not expected (events from the Aug 7,8th of 2009), Do you think it is possible to see JPY strenght in near future (this or next week). ?


Thank You

b.

bschlossberg

January 07, 2010 at 09:09 AM ET

Only if we get hit by very surprisingly bad data

FXDragon

January 07, 2010 at 08:58 AM ET

I was gonna wait till 95. I feel like revising to around 98 to take profits.

NeoFX

January 08, 2010 at 04:31 PM ET

does anyone have any input on the aussie/dollar? we're right back up to the 78% fib ret level again (due to today's bad news). but does this pair still show signs of bouncing down from this point?

Technically speaking it seems like a great sell to me at this point (nice daily evening star formation as well a nice double top on 4hr chart)...but just don't know with all these news. I'm not a great fundamental guy

anyone?

thanks

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.