USD/JPY - Daily Candle Chart 24th March 2009

USD/JPY - Daily Candle Chart 24th March 2009

Yesterday’s cautionary note turned out to be more prophetic than even I expected with the dollar yen ending the day higher with a wide spread up bar closing just below the 9 day moving average, a trend we have seen continue this morning with a break above both the 9 and 14 day moving averages.  This could be a precursor to a retest of the 99 region once again and given the Japanese end year factor combined with the fundamental news due out later tonight I would advise, once again, extreme caution.  The bearish engulfing of last Wednesday seems to have run its course and given the last three days we could be in a further period of sideways consolidation once again.  The two main items of fundamental news on the economic calendar are in the US with Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner both testifying before the House Financial Services Committee on the AIG debacle.  In the economic calendar this event has been red flagged and we could see market volatility following the statement in the question and answer session.  The second item of news concerns the Japanese trade balance due to be released tonight with a forecast of -0.29T against a previous of -0.36T.  These figures represent the difference between imports and exports and directly affect currency demand since importers of Japanese goods have to put for these in Yen.  If the actual is better than forecast then this will be good for the Japanese Yen.  Since early 2008 the figure has grown increasingly negative as Japan’s export led economy has faltered as the credit crisis has deepened and global demand fallen off a cliff.  As an example throughout 2005 to 2007 the trade balance figures were positive and varied between 0.6 and 1.2.

Given the above I do not propose to offer any specific trading recommendation today for this particular pair.  However, you can still check the latest currency news, latest prices on the live currency charts and all the fundamental news on the economic calendar by simply following these links.   Finally I have published the COT index relating to Yen futures which are suggesting that the Yen will actually strengthen in the medium to longer term.