{"id":10287,"date":"2010-06-16T08:08:41","date_gmt":"2010-06-16T12:08:41","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=10287"},"modified":"2010-06-16T08:08:41","modified_gmt":"2010-06-16T12:08:41","slug":"japans-new-prime-minister-and-the-usdjpys-magic-number","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/06\/16\/japans-new-prime-minister-and-the-usdjpys-magic-number\/","title":{"rendered":"Japan\u2019s New Prime Minister and the USD\/JPY\u2019s Magic Number"},"content":{"rendered":"

By Greg Holden<\/strong> – After the government of Yukio Hatoyama came to an end in Japan, the election on June 8 of former Finance Minister Naoto Kan ushers in what some call a needed step to help Japan back into positive growth. But others have doubts.<\/p>\n

Investors are now keeping a closer watch on Japan\u2019s economic rumblings considering Kan\u2019s political slant. Prime Minister Kan is a known fiscal conservative who has expressed dissatisfaction with the current price level of the Japanese yen (JPY). Might it be worth considering that steps will be taken by his new administration to lower its value?<\/p>\n

This question has caused a stir in analysis circles as many attempt to speculate what Kan will do. It\u2019s not necessarily his ruminations about the yen\u2019s current level that have investors worried, many politicians express opinions on issues which they never plan on addressing while in office. Instead, it\u2019s his history of being a politician who follows through with his convictions that spooks so many.<\/p>\n

It doesn\u2019t take a stretch of the imagination to think of him attempting a corrective measure to what he sees as one of the main issues affecting Japan\u2019s growth. With a sudden boost in approval ratings, rising to 44% from below 20%, it appears Kan has some room to maneuver before falling out of favor, as so many Japanese politicians do during troubled times.<\/p>\n

However, it should be worth noting that the primary currency combination of the USD\/JPY seems to have revealed its Magic Number \u2013 this is what I would call the psychological barrier that the pair doesn\u2019t seem to be able to breach. Despite repeated drops in the value of this pair, it doesn\u2019t seem able to break past 88.00.<\/p>\n

Kan may desire a weaker currency to boost Japan\u2019s exports and aid the recovery of its equity markets, but it\u2019s difficult to see the island currency gaining more strength than it currently has under any other circumstances.<\/p>\n

Safe-haven currencies like the yen and US dollar are expected to drop as confidence rises. We\u2019re beginning to receive reports that Greece and Spain are taking necessary steps to counteract recent difficulties, and they\u2019re also beginning to see positive results from those steps, which has led to a beautiful rally in stock markets.<\/p>\n

So the question becomes, will Kan even need to take steps to lower the JPY? Considering what\u2019s happening, my guess is no. Such steps seem counter-productive and destabilizing to the market. But how\u2019s a new Prime Minister to prove himself without doing something<\/em> rash?<\/p>\n

On the chart below you can see the clear downtrend spanning the last 3 years as well as the Magic barrier of 88.00. Even more significantly is the breach of the downtrend a few weeks back and the beginning of what looks like a modest upturn of the pair. Will it continue?<\/p>\n

USD\/JPY \u2013 Weekly Chart<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Forex Market Analysis<\/em> provided by\u00a0Forex Yard.<\/a><\/strong><\/span><\/p>\n

\u00a9 2006 by FxYard Ltd<\/p>\n

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Greg Holden – After the government of Yukio Hatoyama came to an end in Japan, the election on June 8 of former Finance Minister Naoto Kan ushers in what some call a needed step to help Japan back into positive growth. But others have doubts. Investors are now keeping a closer watch on Japan\u2019s … <\/p>\n

Continue reading “Japan\u2019s New Prime Minister and the USD\/JPY\u2019s Magic Number”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-10287","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=10287"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10287\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=10287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=10287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=10287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}