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 regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.