USD/JPY Rises On Risk Aversion, Ignoring Economic Data

Risk aversion from the North American and European sessions is driving the Japanese currency higher on Friday, ignoring some upbeat economic data.

During the North American session, the S&P 500 fell as low as 1,078, its weakest level since early November 2009, and putting the index below its 100-day moving average for the first time since last April. Ultimately the index finished the day at 1,085, though, 1.2% lower on the day.

The only respite came after an upbeat unemployment from Japan. According to local authorities, the country’s unemployment rate fell to 5.1% in December, contrary to calls for an increase to 5.3% from 5.2% the month prior.

Meanwhile the job-to-applicant ratio advanced to 0.46 from 0.45, as expected.

USD/JPY surged 12 pips to 89.80 off an intraday low of 89.689 reached just moments before the announcement.

Released simultaneously, but ignored by the markets, headline national CPI declined by 1.7% year-over-year in December, in line with expectations, but slower than November’s 1.9% pullback. Meanwhile consumer prices excluding fresh food fell by 1.3%, also in line and slower than the prior month’s 1.7% pullback. Excluding fresh food and energy, prices were down 1.3%, just a tad faster than calls for a 1.1% contraction and the previous 1.0% fall.

Also released were the Tokyo CPI statistics for January. Headline inflation was down 2.1% on the year, in line with forecasts and slower than the prior 2.2% shortfall. Excluding fresh food, CPI fell by 2.0%, faster than projections for a 1.8% contraction and prior 1.9% fall. CPI excluding fresh food and energy was down 1.4%, in line with forecasts and slower than the previous month’s 1.5% slide.

The bottom line is that with deflation firmly entrenched in Japan and interest rates very low, it is very hard to trade any of the inflation data until they return to normal.

Just minutes later, preliminary Japanese industrial production grew 2.2% month-over-month, short of forecasts for a 2.5% increase in January and slower than the revised 2.2% gain. Before to revisions, November’s increase was of 2.2%.

In annual terms, production rose 5.3%, short of expectations for a 5.7% pickup, but rebounding from November’s 4.2% contraction, and therefore ending a 14-month losing streak.

Again, the Japanese currency continued to press against the greenback.

So far today, the pair has traded in a range of 89.59 to 90.05. Short term support lies at 88.97 followed by 88.58. Resistance lies at 90.55 followed by 91.88.