USD JPY Approaching November 2009 Bottom

The Japanese Yen is set to rise even further especially iftomorrow’s U.S. Jobs Report is worse than expected. Furthermore, the Fed islikely to put pressure on the Dollar next week following its FOMC meeting when itis expected to announce the renewal of its quantitative easing program.

The Japanese Yen is set to rise even further especially iftomorrow’s U.S. Jobs Report is worse than expected. Furthermore, the Fed islikely to put pressure on the Dollar next week following its FOMC meeting when itis expected to announce the renewal of its quantitative easing program.

Gains in the Yen could be limited by talk that the Bank ofJapan is set to intervene. Although the Japanese government is issuing verbalinterventions at this time, further appreciation in the Yen may hurt exportsand the economy, forcing it to act more decisively than in the past.

The U.S. Dollar traded trading mostly lower versus the majorcurrencies today in light trading as traders curtail activity ahead of Friday’sU.S. Non-Farm Payrolls Report. The employment report is expected to show adecline of 65,000 to 90,000 jobs, pushing up the unemployment rate to 9.6%. Thepublic-sector part of the report is expected to show a loss of at least 165,000jobs due to government firings of census workers. The private-sector isforecast to have added at least 100,000 jobs.

The focus will most likely be on the private-sector number.It this number comes out better-than-expected, look for the Dollar to rise.

The Dollar has been under pressure most of the trading daydue to a surprise drop in weekly initial claims. Unemployment benefits rose by19,000 to 479,000 in the latest week. Pre-report estimates called for a drop to453,000.

The European Central Bank and Bank of England monetary policycommittees voted to leave there respective benchmark interest rates unchangedat historically low levels. The ECB left its key borrowing rate at 1%. The BoEagreed to maintain its 0.50% level. Both moves by the central banks wereexpected.

Following the release of the interest rate decision, ECBPresident Trichet noted that the European bank stress tests completed since thelast meeting have helped increase transparency and fueled a move towardrestoring market confidence in the banking sector.

In the wake of recent strong Euro Zone economic data,analysts had expected Trichet to outline an exit strategy or discuss the ECB’splan for its special liquidity provisions. In other words, is the ECB going tocontinue to provide free-flowing liquidity to the market or begin to withdrawit. Trichet indicated the ECB would consider this action on that next month.

Trichet failed to say anything really bullish about theEuro, but actually may have helped limit gains by stating that the second halfof 2010 was likely to be “much less buoyant” than the second quarter because ofthe implementation of new financial austerity measures. He also added that itwas too early to “declare victory” in the economic crisis.

Based on today’s comments, the Euro is most likely tocontinue to be driven by economic news regarding the U.S. economy. At this time, the ECBseems a little more upbeat about the Euro Zone economy while the U.S. Fed isbeing encouraged to consider the renewal of its quantitative easing program toward off a potential double-dip recession. As long as the U.S. economy remains weak andinterest rates low, look for the Euro to remain firm.

The Bank of England as expected left interest ratesunchanged. Traders will not be watching economic reports to see if theimplementation of new austerity measures and tax hikes has an adverse affect onthe economy after strong second-quarter GDP data was posted. The central bankwill also continue to monitor the inflation rate which is currently above thetarget level.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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