By IFCMarkets

Yen weakened on Wednesday amid weak Japan’s external trade data for this March. The trade surplus expanded more than in February but less than expected amounting to 755bn yens. Compared to the same period of 2015, the Japan’s exports contracted 6.8%, while imports tumbled 14.9%. The department store sales fell in March 2.9% while in February rose 0.2%, the data came out on Tuesday. Will the yen continue weakening? On the chart it will look as the USDJPY increase.

The S&P agency confirmed the Japan’s credit rating at А+/А-1 with Stable outlook on Wednesday . We believe this is neutral news for the yen as the agency expects the national debt to reach 133% of GDP in 2019 given the moderate economic growth. The yen may edge lower on Bank of Japan Governor Kuroda comment the monetary easing does not guarantee the yen weakening. Investors considered his words as a signal the BoJ may announce further monetary easing measures on its next meeting on April 28, 2016. The Bank’s decision will depend on March inflation to be released on April 27. The data may be negative for the yen. The February inflation was 0.3% which is far below the BoJ target level of 2%. Since the end of January when BoJ went negative yen has still advanced almost 11%. The next significant economic data are to be released on Friday morning – the preliminary manufacturing PMI for April.

On the daily chart USDJPY: D1 is correcting upwards from its 17-month low. The overall downtrend still persists. Nevertheless, MACD indicator has formed the signal to rise. The Parabolic has not done it yet as the price has not surpassed the upper signal. The RSI is neutral, no divergence. The Bollinger bands have widened a lot which means higher volatility. The bullish momentum may develop in case the yen surpasses the last upper fractal, the Parabolic signal and the resistance line at 110.5. This level may serve the point of entry. The initial risk-limit may be placed below the two last fractal lows and the 17-month low at 107.6. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 107.6 without reaching the order at 110.5, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Market Analysis provided by IFCMarkets