The release of Q2 GDP of Japan could contain the current market sentiment to encourage the traders to wait for a bottom again of USDJPY to restart buying it. USDJPY has broken its previous resistance at 96.95 easily by the Japanese session. After inability of the Japanese yen to press on the greenback to get down below 96 several times recently.

The Japanese economy has grown by 2.6%y/y and 0.6% q/q while the market was waiting for 3.6% yearly and 0.9% quarterly after cheeriness followed the figures of the first quarter which came previously with growing by 3.8% yearly and 1% quarterly to calm down the pace of the Japanese yen depreciation but now after Q2 figures the door is opened for more stimulating measures by BOJ monetary base and also by the Japanese government which can put aside the recent emerging efforts of sustaining its financial stance by imposing higher sales taxes as that can tackle the consuming pace and increase the worries about the pace of recovery in Japan persisting the deflation which it is fighting with BOJ and By God’s will, waiting for the governmental officials’ comments can forward more guiding references of doing what’s ever possible to get rid of this stance which can cause troubles again to the Japanese yen. 

From another side, the greenback is still looking tied by the prospects changes of cutting the Fed’s QE which have started to contain the market sentiment and its movements against major currencies obviously since Ben Bernanke’s reference to this possibility to be started this year in his semiannual testimony in front of the congress financial committee.

But anyway now, the market is pricing on such an action and that stance is looking obvious to the followers of the recent movement of the gold which is one of the most sensitive instruments against the greenback related to this policy which could lead to push it up to its all time high on 6th September 2011 before easing back to this level.   

The Fed has signaled too in its last meeting on the last day of last month that there are less worries about keeping the QE on with no cutting of it amid benign inflation pressure as its yearly rate is still below 2.5% giving it a space of holding its monetary stimulation plans longer with the unemployment rate is still well above the 6.5% which it has been repeated as a target of it with no revision.

As what has been mentioned in the recent report following that meeting The Fed’s statement briefly could actually give a leeway for the greenback to ease back across the broad with this clear Fed’s interest in pressing further on the mortgage rates and the treasuries yields and from another side, it gives the investors an excuse to sell the greenback favoring taking risks with these stimulating efforts.

Kind Regards

FX Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143


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