Overnight news that Japan’s Tankan survey of business confidence showed a sharp drop, as expected. The yen remains relatively strong despite the gloomy data owing to Japan’s creditor nation status. With its huge current account surplus, Japan tends to send capital overseas when it is feeling confident and hoards it at home when it feels insecure. It echoes the banking crisis as their behavior is almost exactly the same.
USD/JPY, after recovering from the shock of the US auto bailout bill going down to defeat, has been range-bound between 90.50/91.50 for most of the last session and a half. Expect Both USD/JPY and EUR/JPY to remain range-bound as easing risk aversion supports the commodity-crosses versus the JPY but Japanese woes limit USD/JPY and EUR/JPY upside.
