This is a very busy week for the foreign exchange market and currencies are on the move. For the past 2 months, USD/JPY has been trading in a tight range and is prime for a breakout. Between the Japanese government's sales tax hike, the Tankan report, U.S. ISMs and non-farm payrolls, there are no shortages of catalysts for a big move in USD/JPY. Although manufacturing activity in the Chicago region slowed in March, the impact on USD/JPY was limited because manufacturing activity accelerated in the NY and Philadelphia regions this month.
Investors have also taken Fed Chair Janet Yellen's dovish comments in stride this morning because even as she says the Fed is short of reaching its employment and inflation goals, she is still committed to tapering asset purchases at each successive meeting. With U.S. rates headed higher, it is time for some upside momentum in USD/JPY. We believe that most of this week's U.S. economic reports will show a continued recovery in the U.S. economy, providing the perfect backdrop for a rally in USD/JPY.
The following chart shows how closely USD/JPY has been tracking U.S. rates and if 10 year yields hit 2.8%, USD/JPY should be trading above 104.
_20140331150838.png "10 Year Yield vs USDJPY")
USD/JPY is also performing well on the eve of the Japanese government's first sales tax hike in 17 years. According to chart below, USD/JPY rallied more than 4% the month that taxes were raised because economic data did not take a turn for the worse until the following month. There's a good chance the currency pair will behave the same way this time, taking out 104 especially if U.S. labor data surprises to the upside. For more on How the Tax Hike Could Impact USD/JPY in the long run, read our Special Report.
_20140331150913.png "USDJPY")
Investors have also taken Fed Chair Janet Yellen's dovish comments in stride this morning because even as she says the Fed is short of reaching its employment and inflation goals, she is still committed to tapering asset purchases at each successive meeting. With U.S. rates headed higher, it is time for some upside momentum in USD/JPY. We believe that most of this week's U.S. economic reports will show a continued recovery in the U.S. economy, providing the perfect backdrop for a rally in USD/JPY.
The following chart shows how closely USD/JPY has been tracking U.S. rates and if 10 year yields hit 2.8%, USD/JPY should be trading above 104.
USD/JPY is also performing well on the eve of the Japanese government's first sales tax hike in 17 years. According to chart below, USD/JPY rallied more than 4% the month that taxes were raised because economic data did not take a turn for the worse until the following month. There's a good chance the currency pair will behave the same way this time, taking out 104 especially if U.S. labor data surprises to the upside. For more on How the Tax Hike Could Impact USD/JPY in the long run, read our Special Report.
Recommended Content
Editors’ Picks
AUD/USD holds steadily as traders anticipate Australian Retail Sales, Fed’s decision
The Aussie Dollar registered solid gains against the US Dollar on Monday, edged up by 0.55% on an improvement in risk appetite, while the Greenback was crushed by Japanese authorities' intervention. As Tuesday’s Asian session begins, the AUD/USD trades at 0.6564.
EUR/USD finds support near 1.0720 after slow grind on Monday
EUR/USD jostled on Monday, settling near 1.0720 after churning in a tight but lopsided range as markets settled in for the wait US Fed outing. Investors broadly expect US rates to hold steady this week, but traders will look for an uptick in Fed guidance for when rate cuts could be coming.
Gold prices soften as traders gear up for Fed monetary policy decision
Gold price snaps two days of gains, yet it remains within familiar levels, with traders bracing for the US Fed's monetary policy decision on May 1. The XAU/USD retreats below the daily open and trades at $2,334, down 0.11%, courtesy of an improvement in risk appetite.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Relief wave on altcoins likely as BTC shows a $5,000 range
Bitcoin price has recorded lower highs over the past seven days, with a similar outlook witnessed among altcoins. Meanwhile, while altcoins display a rather disturbing outlook amid a broader market bleed, there could be some relief soon as fundamentals show.
Gearing up for a busy week: It typically doesn’t get any bigger than this
Attention this week is fixated on the Federal Reserve's policy announcement scheduled for Wednesday. While the US central bank is widely expected to remain on hold, traders will be eager to discern any signals from the Fed regarding the possibility of future interest-rate cuts.