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

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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.

Date

Last

Open

High

Low

Change %

Sep 28, 2012

77.93

77.62

78.11

77.44

0.40%

Sep 27, 2012

77.62

77.69

77.75

77.57

-0.09%

Sep 26, 2012

77.69

77.74

77.90

77.59

-0.07%

Sep 25, 2012

77.74

77.87

77.93

77.66

-0.17%

Sep 24, 2012

77.87

78.13

78.15

77.81

-0.33%

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

Date

Currency

Event

Actual

Forecast

Previous

 Sep. 25

USD

CB Consumer Confidence 

70.3

63.0 

61.3 

 

NZD

Trade Balance 

-789M

-606M 

97M 

Sep. 26

NOK

Norwegian Unemployment Rate 

3.00%

3.00% 

3.10% 

 

MXN

Mexican Trade Balance 

-0.980B

-0.556B 

-0.427B 

 

USD

New Home Sales 

373K

380K 

374K 

Sep. 27 

USD

Core Durable Goods Orders (MoM) 

-1.6%

0.3% 

-1.3% 

 

USD

Durable Goods Orders (MoM) 

-13.2%

-5.0% 

3.3% 

 

USD

Initial Jobless Claims 

359K

378K 

385K 

 

USD

GDP (QoQ) 

1.3%

1.7% 

1.7% 

 

USD

Continuing Jobless Claims 

3271K

3285K 

3275K 

 

USD

Pending Home Sales (MoM) 

-2.6%

-0.7% 

2.6% 

 

NZD

Building Consents (MoM) 

1.9%

3.0% 

2.0% 

 Sep. 28 

JPY

Tokyo Core CPI (YoY) 

-0.4%

-0.3% 

-0.5% 

 

JPY

Industrial Production (MoM) 

-1.3%

-0.5% 

-1.0% 

 

JPY

Retail Sales (YoY) 

1.8%

-0.2% 

-0.8% 

 

USD

Core PCE Price Index (MoM) 

0.1%

0.1% 

0.1% 

 

USD

Personal Spending (MoM) 

0.5%

0.5% 

0.4% 

 

USD

Chicago PMI 

49.7

53.0 

53.0 

 

USD

Michigan Consumer Sentiment 

78.3

79.0 

79.2 

 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

Date

Time

Currency

Event

Forecast

Previous

Oct. 01

00:50

JPY

Tankan Large Manufacturers Index 

-3

-1

 

15:00

USD

ISM Manufacturing Index 

49.8

49.6

Oct. 02

05:30

AUD

Interest Rate Decision 

3.50%

3.50%

Oct. 03

02:30

AUD

Trade Balance 

-0.70B

-0.56B

Oct. 04

02:30

AUD

Building Approvals (MoM) 

4.7%

-17.3%

 

02:30

AUD

Retail Sales (MoM) 

0.4%

-0.8%

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 

 

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About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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