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Yen Remains Weak Ahead of US Economic Data

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Yen Remains Weak Ahead of US Economic Data

The investment landscape over the next week will focus on the potential for further monetary accommodation from the ECB, BOJ and Federal Reserve. Last week’s testimony from Federal Reserve Chair nominee Janet Yellen solidified the Fed’s bent that rates will remain very low for the foreseeable future. Yellen reiterated the Fed’s stance that the benefits from QE outweigh any risks that bond purchase might cause in the future.

During the week investors will need to absorb Germany’s IFO and Zew survey. The euro zone trade and current account figures will likely reflect an expansion in the surplus to 14 billion Euros in September from 12.0 billion in August. This helps drive home the point that the austerity in the periphery is not being offset by increased activity in France and Germany.

In the US the main economic data will be inflation and retail sales. The consensus expectations for the October consumer price index are to match its 3-year low of 1.0%. Retail sales are expected to slow in the third quarter, notching up a headline number of 0.5%. The New York Empire manufacturing survey last week which show a November at -2.21 versus consensus of 5.0 and an October reading of 1.52 foreshadows that the economy may have edged lower in the fourth quarter.

The Yen continued to remain above support after breaking out on Friday above the 100 per yen level. Support is seen near a downward sloping trend line that connects the highs in July and the highs in September as well as, the 10-day moving average near 99.28. Momentum on the currency pair is strong as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.

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