Fundamental Forecast for Japanese Yen: Neutral
USDJPY test key highs, but limited trader conviction warns against chasing gains.
Mixed technical forecast for US Dollar raises risks of a short-term pullback
For Real-Time SSI Updates and Potential Trade Setups on the Japanese Yen, sign up for DailyFX on Demand
The Japanese Yen traded lower versus the US Dollar for the third week in four and left the USDJPY exchange rate near the key ¥120 level. Why might the week ahead finally bring a major breakout?
Traders have shown little interest in pushing the Yen beyond its narrow three-month trading range, but any significant surprises in upcoming US Personal Income/Spending and Nonfarm Payrolls labor data could change outlook for the otherwise-rangebound USD/JPY exchange rate. A fairly consistent rally from January lows near ¥116 suggests that the next major USDJPY move will be to the topside. Relatively low trader volumes in recent weeks nonetheless limits our enthusiasm for fresh USDJPY-long positions, however. We would ideally see a major shift in market conditions and trader attitudes to justify calling for a sustained break higher.
The key question remains unchanged: when will the US Federal Reserve begin raising interest rates? Yield-seeking investors have typically sold the Japanese Yen against higher-yielding currencies through normal rate environments. And indeed, the fact that the US Fed appears to be the only major central bank to act in 2015 has helped push the US Dollar to 8-year peaks versus the JPY.
Expectations can only take the Greenback so far, and eventually investors will need to see action. Consistent improvements in US Nonfarm Payrolls figures suggest the coming week’s result will further build the case for Fed rate hikes. Yet fundamental risks seem weighed to the downside as few predict that hiring matched the impressive pace seen through January’s report.
Technical forecasts paint a similarly mixed picture for the Dollar/Yen exchange rate, and indecision helps explain why recent CFTC Commitment of Traders data shows speculative JPY-short positions (USDJPY-longs) have fallen to their lowest since November, 2012.
It’s certainly possible that strong US economic data could force a larger break higher in the USDJPY. As far as probabilities go, however, we put relatively low odds on a sustained US Dollar move higher in the week ahead.
FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.