USD/JPY Weekly Fundamental Analysis Jan. 23-27, 2012, Forecast

Economic Events:  (GMT)

Jan. 24
03:00 JPY Interest Rate Decision
07:00 JPY BoJ Press Conference
15:00 USD CB Consumer Confidence
Jan. 25
15:00 USD Pending Home Sales (MoM)
19:15 USD Interest Rate Decision
19:15 USD FOMC Statement
Jan. 26
05:00 JPY BoJ Monthly Report
13:30 USD Core Durable Goods Orders (MoM)
13:30 USD Durable Goods Orders (MoM)
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
15:00 USD New Home Sales
23:50 JPY Monetary Policy Meeting Minutes
23:50 JPY Retail Sales (YoY)
Jan. 27
13:30 USD GDP Price Index (QoQ)
13:30 USD GDP (QoQ)

Please review the daily forecast for explainations and expected results

Rule:

The USD/JPY foreign currency exchange rate is the price of one U.S. dollar – the base currency – in terms of Japanese yen – the quote currency. For example, a bid/ask quote of 89.29/89.32 means that one U.S. dollar can be bought for 89.32 yen and one U.S. dollar can be sold at 89.29 yen.

If the U.S. dollar is expected to appreciate against the yen, then the above quote might rise to say, 89.73/89.76. The forex strategy in this case would be to buy USD/JPY. If, on the other hand, the U.S. dollar is expected to depreciate against the yen, then the above quote might fall to say, 88.68/88.71. The forex strategy in this case would be to sell USD/JPY.

In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.

Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment.

Daily range average : 80-90 pips
Best time to trade: Asian Session (2400 GMT – 0900 GMT)
Some factors affecting the USD/JPY rate:

  • The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
  • Japanese government intervention to strongen their currency sends USD/JPY lower

 

Analysis and Recommendation:

The USD/JPY was on the upside for the week, closing the week at 77.02.

On the local side, the BoJ has downgraded its assessment of the local economic conditions in seven of nine regions in Japan in January from three months earlier. Also a government minister commented in view of the recent downgrades by S&P, Japan could be next.

The USD was up and down all week, with positive jobs reports and negative housing data, but moved up against all currencies when the euro reached an unexpected high and traders began selling it off to take profits, pushing the dollar up on Friday.

The entire week seemed to be focused on Greece and the negotiations with the IIF representatives as deadlines approached. The were rumors flying in every direction, moving the markets but at the close of day Friday no deal had been reached and the IIF representatives packed up and went home stating the negotiations would continue over the week by phone.

The pair is expected to continue to the upside in the beginning of the week, there are several economic reports due early that could effect the markets, but the main event is the EU and Greece, news, rumor, truth or fiction, will move the markets.

Keep an eye on Gold, as it surged on Friday as investors moved to safe-havens. This week will be about safety and risk appetite.

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