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USD/JPY retreated into the 77 level early before staging a comeback to around 77.2. With US markets closed, USD/JPY had very little leads to work on.
There is a solid support base at 77 which the bulls are determined to defend. A fair amount of data is due out of Japan today and the CPI numbers will be in focus. The year-on-year CPI data dropped 0.5%, missing expectations for a 0.3% fall. BOJ Governor Masaaki Shirakawa is expected to speak later today and might indicate what monetary policy stance they will take going forward following the data received this morning. There has also been increasing talk that S&P is looking to downgrade Japan. An official from S&P ratings said it ’may be right’ to say that S&P has moved closer to downgrading Japan.
Moody’s, S&P, and Fitch all currently rate Japan at the same level at the equivalent of AA-. The IMF repeated that Japan's public debt could ‘quickly become unsustainable’ if JGB yields rise. USD/JPY has trekked higher this morning and is currently trading at around 77.3.