Yen Gains Traction after Weak US Data
The yen gain some ground on Tuesday, as yield in the US eased lower, on the back of Monday’s slightly worse than expected ISM services report. Services have now slipped in China, Europe and the US which could reflect a slowing of the global economy. The yield differential moved in favor of the yen, pushing the currency pair away from resistance levels.
In central bank news, Janet Yellen was confirmed by a 56-26 vote in the Senate as the next Chair of the Federal Reserve. In 2010, when Bernanke was re-nominated, 30 Senators voted against him. Yellen is also the first nominee by a Democratic President that was not simply the reappointment of the sitting Chairman since Volcker in 1979. Yellen is seen guiding the Fed on the path that Bernanke outlined. That means that barring a downside shock to the jobs report, the Fed will announce tapering of another $10 billion dollars of treasuries and agency bonds at the FOMC meeting later this month.
The 10-year US treasury saw prices increase after the ISM release softer than expected services data on Monday. The Institute for Supply Management reported that its services index dropped to 53% in December from 53.9% in November. That compared to the 54.8% headline number expected by economists. The new-orders component slumped 7 points to 49.4%, marking the first contraction since July 2009. On a positive note the employment index rose 3.3 points to 55.8%.
The USDJPY moved through support which is now resistance near the 10-day moving average at 104.85. The next level of target support is seen near 102.50. Momentum is negative as the MACD (moving average convergence divergence) index generated a sell signal where the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread. The RSI is printing near 58 which is on the upper end of the neutral range.
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