USD/JPY Monthly Fundamental Forecast October 2012

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Outlook and Recommendation

The USD/JPY closed the month at 77.88. . JPY has benefitted from the depth of its bond market and an ongoing demand for safe haven assets; US – Japanese two-year spreads suggest a clear catalyst for yen weakness. Japanese policymakers are concerned about appreciation, but have yet to move towards intervention. Japanese fundamentals, including loose Bank of Japan policy, are a weight. We expect yen strength to be limited and a weakening trend to develop into year-end

Highest: 79.22

Lowest: 77.14

Difference: 2.08

Average: 78.18

Change %: -0.52

Persistent strength in JPY is an ongoing concern for the Ministry of Finance; however, intervention is unlikely to be the favored FX tool. Over the last two-weeks of September, US-Japanese two-year bond yield spreads rose from their lows as the surprise ¥10trn expansion of the BoJ asset purchase program served to counteract previous Fed easing. USDJPY appears poised to rally back towards our year-end forecast of 80. 

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.

Central Bank The Bank of Japan -

Date of next meeting or last meeting: Sep 19, 2012

Current Rate: 0.100%

Statement highlights of last meeting: The pick-up in Japan’s economic activity has come to a pause. Exports and industrial production have been relatively weak as overseas economies have moved somewhat deeper into a deceleration phase.  On the other hand, domestic demand has been resilient, mainly supported by reconstruction-related demand. Specifically, public investment has continued to increase. Business fixed investment has been on a moderate increasing trend with improvement in corporate profits. Private consumption has been resilient with the employment situation on an improving trend.  Housing investment has generally been picking up.

Economic events for the month of October affecting AUD, JPY, NZD and USD

Date

Time

Currency

Event 

Forecast

Previous

Oct 1

 14:00

USD

ISM Manufacturing PMI

50.0

49.6

Oct 2

4:30

AUD

Cash Rate

3.50%

3.50%

 

4:30

AUD

RBA Rate Statement

   

Oct 3

1:30

AUD

Trade Balance

-0.62B

-0.56B

 

12:15

USD

ADP Non-Farm Employment Change

148K

201K

 

14:00

USD

ISM Non-Manufacturing PMI

53.4

53.7

Oct 4

1:30

AUD

Building Approvals m/m

4.8%

-17.3%

 

1:30

AUD

Retail Sales m/m

0.5%

-0.8%

 

12:30

USD

Unemployment Claims

371K

359K

 

18:00

USD

FOMC Meeting Minutes

   

Oct 5

12:30

USD

Non-Farm Employment Change

111K

96K

 

12:30

USD

Unemployment Rate

8.2%

8.1%

Oct 8

21:00

NZD

NZIER Business Confidence

 

-4

 

23:50

JPY

Current Account

 

0.34T

Oct 11

0:30

AUD

Employment Change

 

-8.8K

 

0:30

AUD

Unemployment Rate

 

5.1%

 

12:30

USD

Trade Balance

 

-42.0B

Oct 12

12:30

USD

PPI m/m

 

1.7%

 

13:55

USD

Prelim UoM Consumer Sentiment

   

Oct 15

12:30

USD

Core Retail Sales m/m

 

0.8%

 

12:30

USD

Retail Sales m/m

 

0.9%

 

21:45

NZD

CPI q/q

   

Oct 16

0:30

AUD

Monetary Policy Meeting Minutes

   
 

12:30

USD

Core CPI m/m

   

Oct 18

14:00

USD

Philly Fed Manufacturing Index

   

Oct 19

14:00

USD

Existing Home Sales

   

Oct 24

0:30

AUD

CPI q/q

   
 

14:00

USD

New Home Sales

   
 

18:15

USD

FOMC Statement

   
 

20:00

NZD

Official Cash Rate

   
 

20:00

NZD

RBNZ Rate Statement

   

Oct 25

12:30

USD

Core Durable Goods Orders m/m

   
 

14:00

USD

Pending Home Sales m/m

   

Oct 26

12:30

USD

Advance GDP q/q

 

1.3%

Oct 30

14:00

USD

CB Consumer Confidence

   

Oct 31

0:00

NZD

NBNZ Business Confidence

   
 

0:30

AUD

Building Approvals m/m

   

 

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About: FX Empire Analyst - Barry Norman

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