After enduring its worst recession since World War II, Japan’s economy grew for the second straight quarter in the July-September period, expanding at an annualized pace of 4.8 percent. It was the strongest growth in more than two years thanks to previous stimulus measures and improvement in global demand. However, with consumer prices falling for the eighth month in October, the government has grown increasingly concerned about prolonged deflation. In order to combat this threat, Tokyo unveiled new stimulus package, worth about $81 billion. New measures intend to bolster employment, extend consumer incentives to buy eco-friendly products and provide support for small and medium-size firms hurt by the strong yen.

Decision about this new stimulus comes at time when other central banks are starting to put an end to excessive liquidity policies. European Central Bank has a plan in place, while others, like RBA, started to increase rates already. This new government spending will push public debt to new record levels and will surpass revenue for the first time since 1946. Japan has the largest level of debt among industrialized countries. Just this fiscal year  tax revenue is expected to be 36.9 trillion yen ($412.9 billion), while government bond issuance is at a record 53.5 trillion. Unenviable situation, worse than US. Long term Yen prospects are dire.

At current time, though, Japanese Yen is doing just fine. After few days of sell off, currency appreciated today, even if threat of intervention is ever present. Something that BoJ has been warning about lately.  I have been looking for strength of JPY, so rally was welcome by me. Unfortunately, price development didn’t follow my script exactly, so trades were not as effective as they could have been.

Kiwi-Yen chart from last post outlines intended trades. Expectation was for the price to test 63.30 or so level, bounce of it and then test it again. There was no bounce, price moved lower. I decided to enter a short there, but only half my customary size for the account. I closed this trade about an hour ago for +74 pips. I don’t think much more will happen today, and have to review my strategy. I will consider another sell IF price gets about 64.00, using 4H chart. Should the price go to as high as 65.00, I think it will change polarity and my view from bearish to bullish. To the downside, I’ll be zooming in to 1H charts and look breakouts, once a promising situation develops.

After a long wait, EUR-USD trade from Before Thanksgiving  post is finally under way. Long in coming, hopefully completion will happen much sooner. Since sell order was placed, price made another bullish run, before collapsing. Important support at 1.48 was finally broken filling my order. Intermediate chart was used and sometimes it takes a long time for set ups to turn into trades on this time frame. At any rate, trade is live.
Bank of Canada had policy making meeting today, which produced no surprises. Interest rates were left unchanged at 0.25%, record low for BoC. Statement once again warned about the strength of CAD in relation to USD. This implies “possible corrective steps” to be taken, (read: intervention), but at this stage does anybody take them seriously? Things should get more lively on the 1oth when both Bank of England and Swiss National Bank have meetings. Two more days.

Mike K.