EUR/JPY Fundamental Analysis – week of July 11, 2016 -Forecast

The EUR/JPY ended the week at 111.09 falling 2.70% for the week as the euro weakened as the yen soared. Policymakers may be powerless to rein in the upward pressure on a currency that’s seen by investors as a safe bet in times of turmoil. The yen has gained strongly against all major currencies since the Brexit vote.

In the market mayhem immediately after the Brexit vote, the yen briefly broke below 100 to the dollar for the first time November 2013. Since then, Japanese officials have said they are watching markets closely but they haven’t sold the yen to drive down its value. Economists doubt how effective that would be.

“The historical track record is discouraging,” said Marcel Thieliant of Capital Economics, pointing to two previous interventions by Japan in the past 15 years. “In both cases, the yen continued to strengthen despite strong purchases of foreign currency.”

Economists at HSBC say the central bank’s “monetary policy options are dwindling.” The Bank of Japan has a policy meeting at the end of July at which it’s widely expected to boost stimulus. It may call an emergency meeting sooner if the yen strengthens too much. But policy moves are likely only to “ease the pace of yen appreciation,” said HSBC.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our  weekly reports and we provide daily updates and outlooks.