EUR/JPY Monthly Fundamental Forecast – July 2016

The EUR/JPY is trading well below its trading range but fell as low as 112 this month as Brexit spurred risk off trading. The safe haven yen soared while the withdrawal of the UK from the EU weighed on the euro. The pair is trading at 114.565 seeing a decline of 6.21% for the month and on an annual basis is down 12.88%. “Given concerns over the effects of the Brexit vote and the strengthening yen, there is a high chance that the BOJ will ease further at its July meeting,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center in Tokyo. “If the BOJ doesn’t move this time, there’s a possibility that the yen will strengthen further.”

Japanese Prime Minister Shinzo Abe, stumping for a July upper house election, is warning voters against casting their ballots for the opposition at a time when world financial markets are in turmoil after Britain’s shock vote to leave the European Union.

Abe’s ruling bloc already looked set for a hefty win in the July 10 election but experts said the uncertainty spawned by Brexit was likely to persuade Japan’s cautious voters to give his coalition even greater backing.

The shift could give Abe’s Liberal Democratic Party and like-minded political parties a better shot of obtaining a two-thirds majority in the upper chamber needed to begin the process of revising Japan’s pacifist constitution for the first time since it was forged after WWII.

Our forecast for July 2016: 112.25-114.50

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