More bearish news from Japan. Industrial production for February increased 6.9% vs. 9.9% expected on a base Y / Y M / M base is even worse, the decrease of 2.3% when planned growth 3.6%. This is not the first time that the figures of industrial production, however, were disappointing. Since the beginning of 2013, this economic measure came in below expectations 12 of 15 times. However, this did not prevent traders to believe the hype abenomics before, with Japanese stocks climbing all JPY still weakening for most of the year 2013.
Things are pretty similar in moment. Nikkei 225 is bullish today, despite the latest setback, while the USD / JPY continues to climb higher, although the most recent data once again reflects the failure of abenomics or at the very least on the market optimism on the effectiveness of the stimulus far. It is also possible that these traders are simply focused on the possibility of additional stimulus by BOJ in May or June The only problem is that the Bank of Japan have tried to distance away / refusing to commit to a stimulus confirmed top up, instead opting to use rhetorical statements on how they will intervene if necessary (perhaps be they made a playbook sheet Draghi). Therefore, there is a huge chance that the market will be disappointed in time, increasing the potential risk of deterioration.
It should also be noted that the USD / JPY has been steady in February and March, two months traditionally see the strengthening of the Yen due to the repatriation of overseas funds by Japanese . The reason prices are not can be attributed to the fact that foreign funds were seen leaving Japanese equities. This increases the risk of falling further Japanese stocks but is a mixed signal for Yen.
If abenomics ultimately fail, it is possible that the Japanese Yen will strengthen in the short term the market will resume premiums they have given USD / JPY in the last 1.5 years on the promise of BOJ Intervention. However, the fundamentals will also dictate the demand for yen will be weaker than the Japanese economy is likely to be extremely low (and perhaps even hopeless), even if abenomics fail to revive the sleeping giant. Therefore, the Convention on the Yen being a "safe haven" may need to be rewritten and you could see Yen capitulating in the worst case for the Japanese economy.
That being said, it seems that Japanese traders are still "living the dream". What this means is that the violation of 103.0 resistance is possible because the prices have just broken above the downward trend line, while the Stochastic Curve still have the space to go higher before the end the current bull cycle. However, a break above 103.75 previous swing high is less certain. However, if the market continues to believe that the additional stimulus comes BOJ, a break of resistance mentioned above for a return above 104.0 is impossible
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