Analysts at MUFG Bank point out that risk will continue to be the key driver of the Japanese yen. They argue USD/JPY has closed above its 200-day moving for the first time since the end of April, opening the door to further gains towards 110.00.
Key Quotes:
“We assume risk-on type trading conditions will persist. That points to further yen depreciation. Since 8th October, the yen has weakened by around 2.0% versus the dollar and even more versus many non-dollar currencies but we see scope for this to be maintained into next week. There certainly looks to be scope for increased speculative yen selling. The leveraged yen positioning to Tuesday of last week was still modestly long yen – while yen depreciation since suggests yen short positions now, the scale of positioning remains modest. Secondly, weekly flow data from Japan indicates a notable pickup in Japan equity purchases by foreign investors. Purchases have totalled JPY 2,100bn in the last four weeks – down from JPY 2,752bn last week, the largest since April, which coincided with USD/JPY highs for 2019. If risk-on persists through next week, we see scope for a retest of the 110.00 level, especially given the breach of 109.32 – the Aug high.”
“The key for determining near-term direction of the yen is of course whether the risk on rally extends into next week. Good news over a possible trade deal is certainly now in the price but we don’t see disappointment coming and momentum points to some further yen selling ahead. Our USD/JPY yield based regression model suggests to us that yield is not a reliable influence in determining short-term direction.”
“A yield influence event next week for USD/JPY would be the testimony by Fed Chair Powell to the Joint Economic Committee but we doubt this testimony will be a notable market mover given it is unlikely to differ hugely from Powell’s recent FOMC press conference on 30th October. Hence, broader risk appetite and financial market conditions will be the key near-term influence.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment 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.