Central bank policy
The Bank of Japan has a strong bearish bias. With Japan struggling with deflationary pressures for years and a large QE program, the outlook for the Bank of Japan remains tilted to the downside.
COT report
The fact that the BoJ is likely to remain on hold with their interest rates, while the rest of the world is expected to hike rates has recently resulted in some high levels of selling from asset managers and leveraged funds. Check out the table below:
With the BoJ so bearish the rate differentials between the Japanese 10y and the US 10y are usually just seen in the ebbs and flows of the US 10y. Remember that the BoJ has yield curve control on their bond yields. So, the key point to note is this:
-
A falling US10Y = a rising JPY.
-
A rising US10Y = a falling JPY.
This correlation is not always perfect as it can ebb and flow, but it is a correlation to be aware of when trading the JPY and in particular the USDJPY. Look at the USDJPY chart below and its close correlation with US10y.
Oil prices
Rising oil prices is a negative for the JPY as pricier crude take JPY out of Japan. Japan buys most of its oil from overseas and a weak Yen will make those imports more expensive. If oil starts gaining to the upside watch out as this can weaken the JPY.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.