USD/JPY: Japan Ready To Intervene If JPY Firms To 90-95 USD?
- Koichi Hamada, a key economic adviser to Prime Minister Shinzo Abe, said Japan will intervene in foreign exchange markets if the JPY strengthens to 90-95 per USD, even if that upsets the US. The Japanese currency firmed to an 18-month high at 105.55 yen against the dollar last week after the Bank of Japan kept monetary policy unchanged. The BOJ held off from expanding monetary stimulus, defying market expectations for action even as soft global demand, an unwelcome rise in the yen and weak consumption threatened to derail a fragile economic recovery
- Hamada said the central bank does not need to undertake further monetary easing for a while and can wait to gauge the effects from negative interest rates it adopted in February. Japanese authorities last intervened in currency markets in 2011, when they sold yen for dollars.
- Asked about "helicopter money" - underwriting government debt so the money can go directly to citizens - Hamada said such policy would lack safeguards against inflation. However, he would not oppose postponing a sales tax hike or cutting the tax and keeping the current monetary policy, which would be equivalent to the government distributing cash to consumers.
- The USD/JPY closed above 108.73 yesterday, 50% retrace of the 111.90-105.55 fall. There is scope for gains to 109.47, 61.8% retrace of 111.90-105.55 drop. Breaking and closing above 109.47 may open the way to further gains to resistance area of 110.40/60. In our opinion no position on the USD/JPY is justified from the risk/reward perspective. We took profit on EUR/JPY long at 124.00 yesterday and stay long on GBP/JPY and AUD/JPY.
USD/CAD: Loonie Steadied After Recent Losses
- Oil sands companies around the Canadian energy center of Fort McMurray began to restart operations on Tuesday after an out-of-control wildfire forced a week-long shutdown. Top provincial and industry officials said production in much of the region should ramp up soon. Facilities north of Fort McMurray that had been shuttered largely because of heavy smoke rather than fire were seen as likely to come back on line in a matter of days in many cases.
- Supply disruptions in Canada and elsewhere supported oil prices, offsetting concerns about growing US stockpiles.
- The Bank of Canada said it is too early to assess precisely the economic impact of the Alberta wildfire, adding that it will have more to say in its interest rate decision later this month. In our opinion the temporary interruption alone is unlikely to force the central bank to act. Asked late last month about what it would take to consider cutting again, Governor Stephen Poloz said there would need to be a significant economic shock for policymakers to resume an easing bias.
- The loonie touched a one-month low on Monday and has lost nearly 3% since the start of the month, giving back just a small part of the about 14% gain it racked up between late January and the end of April. The CAD stabilized on Tuesday.
- We used elevated USD/CAD levels to get short. An important resistance area is near 1.2978/80. The nearest support is 7-day exponential moving average at 1.2857. We opened also a short EUR/CAD position.
Source: Growth Aces - Forex And Precious Metals Trading Signals