Decline in Core Machinery Orders Turns Yen Weak

Japanese YenFor the most of October 2017, the USD/JPY currency pair had been trading in the range bound. The currency pair was in the narrow range of 113.20 and 114.20 due to tensions between the USA and North Korea, mixed economic data from US and Japan and the negative impact of hurricanes Irma and Harvey.

We speculate the USD/JPY currency pair to rally for the short term period, and the reason for the same is discussed below.

Last week, Jerome Powell was selected by US President as the Chairman of US Federal Reserve. Powell who is a celebrated banker is likely to follow the footsteps of outgoing Chairman Janet Yellen by normalising the interest rates and control the rising inflation.

The financial market was expecting Donald Trump to elect John Taylor, a Stanford Professor, to be the next Chairman of Federal Reserve. This, in turn, has made the US Dollar weak. However, there are some speculations that Taylor would be appointed as the Vice Chairman of the Federal Reserve. Thu Lan Nguyen, who is an analyst at Commerzbank is of the opinion that Taylor’s appointment would have a positive impact on Greenback and there would be frequent rate hikes.

In addition to above, Congressional Republicans support a rule-based monetary policy which is likely to be adopted by John Taylor. Hence, the US President would not have a lot of opposition from the Senate. Instead, Republicans are expected to vote in favour of US Tax Reform Plan. Hence, it is going to be a win-win situation for the Congressional Republicans and Donald Trump. There is news that Vice Chairman would be announced soon.

Bloomberg TV Markets and Finance

The bank lending rate in Japan has climbed to 2.8 percent in October 2017 but was unable to meet the market expectations of 3 percent. According to Central Bank of Japan, lending by banks and trusts has increased to 518.090 trillion Yen in October. As per the figures reported last week, the lending rate has been revised to 2.9 percent from 3 percent.

On that day, Japan’s Cabinet Office declared a monthly decline of 8.1% in core machinery orders in September. The analysts were hoping for a drop of 1.8 percent. In the earlier month, there is a 3.4% increase in core machinery orders. The core machinery order which is a capital expenditure is a critical data reflecting the economic conditions of Japan.

The Ministry of Finance also declared a decline in current surplus to Yen 1.84 trillion in September as compared to Yen 2.27 trillion in August. The market was hoping for a current surplus of Yen 2.05 trillion. The rally in USD/JPY currency pair is expected due to political developments in the United States and robust economic data of Japan.

USDJPY Pair Nov 13th 2017

USDJPY Pair Nov 13th, 2017

According to the above H4 price chart, the currency pair is showing strong support at 113.15, and the RSI Indicator is in the oversold region. Hence, the rally in USD/JPY is likely to commence soon. The next resistance level is expected at 115.50.

To make a profit from the probable uptrend in this currency pair, traders should open a LONG position in spot FX market. They should make an entry around 113.20 and place Stop Order below 112.10. The LONG position should be sold when the pair rises to 115.50.

In addition to above, traders should also invest in a CALL Option to get higher returns. For the trade, the strike price of 113.20 is preferred. To Take Profit, traders should select the expiry period around two weeks.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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