Strong Economic Showing Fails to Rally Yen
Yen – The Yen is trading lower this morning, despite a stronger-than-expected GDP number in Japan. Price action indicates that the Yen carry trade is alive and well, with traders borrowing money in Japan and investing in higher-yielding assets in Europe and Australia. Talk of the BOJ possibly lowering interest rates may cool in the coming weeks, especially if the Japanese economy can show some follow-through to the GDP figure. A strengthening economy in Japan coupled with a slowdown in Europe may cause some unwinding of Euro/Yen carry trades. This view could be tempered by the fact that Australia is expected to keep raising interest rates due to inflationary concerns, which could hold back Yen rallies. March futures closed below support at .9300, but did manage to hold minor support created by January 10th highs at .9223. A late-day rally may result in a bullish hammer formation, which could signal a bullish reversal to the recent slide. Momentum is outpacing the RSI and price, indicating a near-term bullish bias. Support can be found at .9218, .9171 and .9096, while resistance comes in at .9340, .9415 and .9462.
Rob Kurzatkowski, Commodity Analyst
