Monday, February 27, 2012

Watching USD/JPY, Tokyo Nikkei Stock Index For Confirmed Breakouts

Source: tamakisono on Flickr
USD/JPY (Dollar/Japanese Yen) is currently trading at 81.04, up 11.8% from 76.02 on February 1. Nice move. Additional easing and an inflation target was announced by the Bank of Japan on February 13. From Dow Jones Newswires at Nasdaq.com:

"The central bank's policy board said it will boost the size of its asset purchase program--the main tool for credit easing amid near zero interest rates- -to Y65 trillion from Y55 trillion, by increasing purchases of Japanese government bonds."

As you can see in the chart below, USD/JPY pierced through a major downtrend line from 2007-8, but it still needs confirmation. Now it is down 0.27% at 80.90. It also looks like the Nikkei 225 stock index pierced through the downtrend line from 2007 on Friday (2/24), but it is close to testing the 200 week moving average resistance level.

So, is it finally time for the Japanese Yen (JPY) to break down and Tokyo Nikkei Index to break out? I'm going to start watching JGB yields (Japanese Government Bonds), JGB futures, JGBL (JGB ETN - see the quote widget), JGB 5Y CDS and JGB 10Y CDS (credit default swaps), yen crosses, and the Nikkei 225 Index everyday. Recently, the Bank of Japan head warned that a rise in interest rates by 1% could expose major banks to ¥3.5 trillion in losses. So things could get interesting in Japan soon. In other news, the next LTRO offering by the ECB is set for 2/29, and Fed Chairman Ben Bernanke gives his semi-annual monetary policy report to the House on the same day.

Articles:

Yen hits 9-month low vs. dollar, euro holds firm (Reuters)
Yen Near Weakest in Four Months Against Euro on Global Sentiment (Bloomberg)
Yen’s Worst Slump Since 2009 Shows Intervention No Match for BOJ Purchases (Bloomberg)
Nikkei eases from 7-month high, yen supports exporters (Reuters)
Yen Poised for Short-Term Bounce; ECB LTRO, Fed Chair Bernanke Due (DailyFX)



Tokyo Nikkei Stock Index

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