USD/JPY Weekly Fundamental Analysis October 1-5, 2012 Forecast

Introduction: In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.
Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment. 

• The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
• Japanese government intervention to maintain their currency sends USD/JPY lower

Weekly Analysis and Recommendation:

The USD/JPY is trading at 77.93 as the USD finally added some momentum. The yen was lower at the end of the week despite the risk-off atmosphere as investors suspect the BoJ may devalue the yen.  PM Noda announced that he will reshuffle his cabinet next week and the Japanese jobless rate unexpectedly contracted – both would-be positives for the yen.  However, with ever more Japanese companies citing yen-strength as the main factor for their weak earnings, speculation is building that a break below 77 would likely trigger another bout of central bank intervention.

There must have been some serious month-end demand for USD/JPY today. Not sure if it was organic or was engineered by our friends at the Ministry of Finance in order to allow corporate to revalue their books at the end of the quarter. I would have expected them to hold off until the end of the Japanese fiscal year on Oct 31 before trying to push the dollar up. The spent over $100 bln to accomplish that goal last year to little lasting effect…

We’re up above 78.00 at the moment having spent much of the US session grinding higher. The buck was firm during the risk-off phase this morning and is even firmer now that risk aversion has eased following the Spanish stress test

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. 

Major Economic Events for the week of September 24-28, 2012 actual v. forecast for Yen, the Aussie, the Kiwi and USD

 Historical: From 2010 to present

Highest: 94.99 on May 05, 2010

Average: 82.77 over this period

Lowest: 75.58 on Oct 31, 2011

Economic Highlights of the coming week that affect the AUD, JPY, NZD and USD

Government Bond Auction

Date Time Country 

Oct 01 10:00 Norway 

Oct 02 09:15 Austria 

Oct 02 09:30 Belgium 

Oct 02 09:30 UK 

Oct 02 14:30 UK 

Oct 03 09:10 Sweden 

Oct 03 10:00 Norway 

Oct 04 08:30 Spain 

Oct 04 08:50 France 

Oct 04 15:00 US 

Oct 05 15:30 Italy