The Tankan Manufacturing Index is major economic indicator in Japan. USD/JPY is climbing slowly to the magical 100 mark. Will this release push it over the top?
Update April 2011: for the latest on this important Japanese indicator, see the Tankan Manufacturing Index page on Forex Crunch.
USD/JPY is trading sideways for a few weeks. On March 4th, USD/JPY reached the peak of 99.65. It was very close to adding a digit, but this psychological resistance line stood firm. Getting above 100 was hard.
Since then, it has been getting close there again and again. This afternoon, it has topped 99 and peaked at 99.36.
The US dollar is weakening across the board on disappointing data: Chicago PMI fell to 31.4, worse than 34.3 that was expected. CB Consumer Confidence, the major American figure for today, printed a disappointing 26 points, less than 27.8 that was expected, and a very low figure in general.
All these bad figures led to weakness for the greenback. And what happens when the dolalr weakens? Well, the Japanase Yen weakens even more. This Dollar-Yen correlation happened yesterday in the other direction – the dollar strengthened, and the Yen strengthened even more.
The Tankan Manufacturing Index is a quarterly survey of 1200 leading businesses in the land of the rising sun. It is a highly regarded economic indicator.
Tankan Manufacturing Index is expected to be negative, at -55. This is much worse than -24 last quarter. In the quarter before it, the index stood on -3. There’s a fast deterioration in this index, which goes hand in hand with the tumbling Japanese economy, as reflected in the Prelim Industrial Production figures.
With USD/JPY being so close to 100, the Tankan Manufacturing Index in Japan can take it over the top. If it shows a figure worse than -55 or very close to it, the Yen can tumble and make a strong move.
Many stop losses are positioned around the magical 100 number.
Will USD/JPY get another digit? We’ll see quite soon…