What I expect regarding the USD/JPY

hello,

Last week we published a lot of data from the Japanese economy. Most of them turned out to be really good, which should be reflected in the strengthening yen:

- The unemployment rate fell from 4.0% to 3.7% (consensus 3.9%);
- Inflation increased from 1.5 to 1.6% (1.5%);
- Production increased from 4.8% to 7.3% (7.3%);
- PMI rose from 55.2 to 56.5 points;
- Number of construction of new homes increased from 1,037 million to 1,055 million, and the November data was revised upwards;
- Growth in car production rose from 10.2 to 12.2%

Almost all readings positive for the yen. Only core inflation in Tokyo for January (0.3%) and consumer spending (+0.7% y/y) were lower than expected.

chart 1. USD/JPY Daily, 2014-02-02

According to the analysis presented in the chart I expect in the coming weeks strengthening of the Japanese yen.

The reasons why such a scenario is to realize are several:
1. strengthening of the U.S. dollar against the euro;
2. very good macroeconomic data for the Japanese economy;
3. confusion with emerging markets: the bankruptcy of Argentina, Greece, capital flight from Turkey (The trade deficit in December amounted to 10 billion USD) and capital flight from Hungary. Intervention in the foreign exchange market in Croatia;
4. correction of SP500 Index.


regards,
oscarjp

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