Is the Japanese Yen lining up for more weakness? | US state Reserve Banks have clout too

The US dollar against the Japanese Yen pair looks like it is getting ready to return to its upward trajectory, which would be calculated to bring it through the psychological 105.00 resistance level where it baulked as a result of the lower than expected US Non Farm payrolls report last Friday.

It can be seen that the rate has bounced off the 38.20% Fibonacci retrace level, with almost clinical precision. The next support is in the 103.80 to 103.90 region.

According to the Dow Jones newswire, many eastern dealers have been expecting the pair to move up above the 105.00 level for the last few days. This can be a problem because when expectations of a rise are too high, stop loss sell orders, which are typically placed at a lower level for protection, can be triggered en masse if things go even slightly in the unexpected direction. Then the downward thrust will be exacerbated in what is known as a “short squeeze”.

US state Reserve Banks have clout too

The investment world hangs on the pronouncements, reports and determinations of the United States Federal Reserve, which is the central bank of the USA. There are, however, state reserve banks also, and their words can have an impact on sentiment that is often almost as profound as those that emanate from the Eccles Building in Washington, DC, which is where the Fed is headquartered.

Last week alone there were reports from three state reserve banks and one monthly survey of local economic indicators, called the “Beige Book”. In each case there was a notable period of volatility on the short time scale charts at the precise moment of release. In addition, a number of state reserve bank governors, who sit on the Federal Reserve, although not all vote, made speeches that were closely monitored, particularly for clues about Quantitative Easing.

On Tuesday we had the Empire State Manufacturing Index, which comes from the New York central bank. The beige book, which is an almost anecdotal survey of the regions by the Federal Reserve, came out on Wednesday. Next up, on Thursday, was the “Philly Fed”, or the Philadelphia Fed Manufacturing Survey and today, Friday, sees the Reuters/Michigan Consumer Sentiment Index. This comes out at 14:55 GMT.