Yen Plunges As Threat Of Deflation Looms

The Flash Manufacturing Output Index for Japan was released yesterday, with a reading of 47.9 for April, lower from 49.8 in March. The Nikkei Flash Manufacturing Purchasing Managers’ Index (PMI) this month also witnessed a fall of 1.1 points to 48.0. The index currently shows the fastest pace of decline in the last three years. In the recent two months the flash Manufacturing PMI has turned downwards, staying under the average. This reflects a slowdown in the manufacturing sector.
The Ministry of economy, trade and industry (METI) today reported that Japan’s tertiary industry activity index (seasonally adjusted), inched down 0.1% in February, smaller than the forecast of a 0.4% drop. The decrease came on the back of a fall in activity in the information services, electricity, gas, heat supply and water sectors in February was dominant the rises in information and communications, wholesale trade, finance and insurance. On a year basic, the index edged up 2.3%.
The Bank of Japan (BOJ) is scheduled to hold a two-day meeting on April 27/28 and economists predict that the central bank will continue easing of the monetary policy. Interest rates may be lowered further from the already negative levels. In Friday’s trading, Japan’s benchmark Nikkei index ended the day at 17,572.49, an 11-1/2 week high.
Canada’s consumer price index m/m is to be released a little later. It is expected to increase 0.3%, higher than the 0.2% increase in the preceding month. The Canadian dollar is on its way to strengthening further, as oil prices’ continue rising.


Fig. CADJPY H1 Technical Chart
CADJPY is on track to rise on a weakening yen. The price has been moving sideways around the level 23.6 of Fibonacci retracement for some time, and started climbing up, to break through the level 0. The trend indicator shows that the market is moving towards a clear uptrend as the green arrow appeared under the price chart. DI+ now is higher than DI-, also suggesting a buy position. The pair is expected to surge higher.
Trade suggestion
Buy at 87.225, Stop loss at 87.021, Take profit at 87.584.

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