USD/JPY – Lowest Jobless Rate Since 2008

We have a myriad of good and bad news coming out from Japan today.

The Good
– Unemployment rate in Japan hits multi-year low, coming in at 4.1% vs 4.2% expected and lower than previous month’s 4.3%
– Household spending jumped 5.2% higher Y/Y vs expectations of 1.6%

The Bad
– Industrial Production is growing, M/M increment of 0.2%, but lower than the 0.4% expected and slower than last month’s 0.6%
– Y/Y Industrial Production figures came in -7.3% vs -7.2% expected, but rate of decline lower compared to previous month’s -10.5%

The Ugly
– Retail Trade shrank 0.3% Y/Y, and -1.4% after seasonal adjustments. This is close to a 100% reversal of previous month’s 1.7% gain, and a much stronger decline than expected.

Well, the numbers are a mess, with Household spending higher yet retail sales figure heading lower. The 2 numbers that are supposed to give us a feel of consumer sentiment failed to agree, and hence no firm conclusion can be reached. Similarly, industrial production remains in the red on a Y/Y basis, and the increment of 0.2% M/M is really nothing to behold of, considering the weak Yen that is supposedly helping exports and also stimulus measures that are supposed to encourage more capital spending and expansions by Japanese firms. It seems that all the stimulus and weak Yen does is to help exporters reap in higher profits after currency conversion rather than truly helping firms to produce and sell more to the international markets.

Daily Chart

It has been long noted that USD/JPY tended not to react to economic news from Japan, and the confusing numbers today certainly doesn’t help market react to the news any better. From a technical perspective, price is currently on its way to confirm the double top chart pattern that can help bears to move towards 94.3 and potentially beyond. However, that took a snag recently with price finding support around 97.4, the confluence with 15th April’s closing levels. To be sure though, current breakout from the rising trendline remains in play with the 3 black crows candlestick pattern not yet invalidated. Stochastic readings are also continuing to point lower, with readings just recently clearing the interim trough level of 70.0.

Hourly Chart

Looking at the Hourly Chart, the rebound at 97.4 appears to be less scary with lower peaks seen for the past 2 trading days. A new descending channel is in play, and current price levels appears to be bouncing off Channel Top towards Channel Bottom. Stochastic readings has recently formed an interim trough, but readings are currently moving sideways and hint at a new interim peak forming, which will help to strengthen the case for a move back towards Channel Bottom. Based on current Channel levels, a move towards Channel bottom will inadvertently break the 97.4 level and will also help to push for an extension of the bearish breakout on the daily chart.

As mentioned previously, BOJ is done for now, and with that there will not be any other strong fundamental news that can potentially allow Yen to weaken further. Traders who think that Fed pausing QE3 may result in stronger USD and bring USD/JPY higher, but risk-off appetite that result in QE stoppages may also result in rush to safety, which makes Yen a prime candidate especially when it is considerably much cheaper than before. With technicals also pointing lower, the 100.0 dream of bulls may need to be shelved for now until stronger impetus present itself again. 2014 BOJ stimulus anyone?

More Links:
NZD/USD Technicals – Rally towards 0.868 back on track
GBP/USD – After Ten Week High, Eases Back Under 1.55
AUD/USD – Moves Back to Key Level of 1.0360

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