Strong U.S. Data Extends Gains in USD/JPY

Last updated 5/28/2009 8:56 AM ET (GMT -5) 2 Comments

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Kathy Lien

Director of Currency Research, GFT

Stronger than expected U.S. data is adding to the downward pressure in the U.S. dollar. Durable goods rose 1.9 percent, the strongest rise since December 2007.  This was an overwhelming good report with little underlying signs of weakness.  The details suggest that we may be seeing a resurgence in capital investment and a bottom in the automobile market.  Car inventories are very high right now, forcing dealers to offer generous incentives and consumers are taking the bait.

The durable goods and jobless claims reports give us more reasons to believe that the U.S. economy is stabilizing.  There are still uncertainties linked to Chinese growth, GM bankruptcy and high oil prices, but for the time being, traders are taking these reports to be risk positive.

The biggest story in the currency market today is in USD/JPY.  Its sharp rise has pushed all of the Japanese Yen crosses higher. On Wednesday, we talked about how investors sold long term bonds aggressively , driving 10 year yields to the highest level since November 2008 and 30 year yields to the highest level since August 2008.  The attractiveness of long term bond yields has brought Japanese investors back into the U.S. Treasury markets even as the U.S. credit worthiness remains in question. 

Source: Bloomberg

Comments (2)

HT

May 28, 2009 at 09:45 AM ET

I always read your commentary. I visit this site many times a day to make sure I don't miss anything.
Excellent analysis - clear and reasonable.

klien

May 28, 2009 at 02:59 PM ET

Thanks HT!

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.