USD/JPY Weekly Fundamental Analysis October 22-26, 2012 Forecast

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USD/JPY Weekly Fundamental Analysis October 22-26, 2012 Forecast

USD/JPY Weekly Fundamental Analysis October 22-26, 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 ended the week climbing towards the 80 big number. After two months of being stuck in a range close to the 78.50 range the USD was able to gather some momentum to move towards the 80 level. The pair closed the week at 79.33.  Two weeks of positive eco data in the US showed definite signs of recovery, while Japan still sees negative reports. With the better eco data, the possibilities of additional Fed QE in the US are reduced helping drive the price. On the other side the Bank of Japan is under instructions to find ways to stimulate the economy by its November meeting.

Date

Last

Open

High

Low

Change %

Oct 19, 2012

79.33

79.32

79.43

79.14

0.00%

Oct 18, 2012

79.32

79.07

79.45

78.99

0.33%

Oct 17, 2012

79.06

78.86

79.14

78.62

0.26%

Oct 16, 2012

78.86

78.79

78.97

78.72

0.08%

Oct 15, 2012

78.79

78.48

78.86

78.33

0.40%

This week is a two-day meeting of the Federal Open Market Committee, which concludes Wednesday. Nomura analysts said considering that QE3 was announced in the September meeting, they now expect the FOMC to enter a holding pattern while watching for signs of a ‘substantial’ improvement in the labor market…. With the FOMC in wait-and-see mode, the ongoing discussion among participants around crafting a consensus forecast is likely to intensify, while other discussion may focus on what to do when Operation Twist ends in December.

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 October 15-19, 2012 actual v. forecast for Yen, the Aussie, the Kiwi and USD

Date

Currency

Event

Actual

Forecast

Previous

Oct. 15

AUD

Home Loans (MoM) 

1.8%

1.4%

-0.7%

 

CNY

Chinese CPI (YoY) 

1.9%

1.9%

2.0%

 

CNY

Chinese PPI (YoY) 

-3.6%

-3.6%

-3.5%

 

CNY

Chinese CPI (MoM) 

0.3%

0.4%

0.6%

 

JPY

Industrial Production (MoM) 

-1.6%

-1.3%

-1.3%

 

USD

Core Retail Sales (MoM) 

1.1%

0.6%

1.0%

 

USD

Retail Sales (MoM) 

1.1%

0.8%

1.2%

 

USD

NY Empire State Manufacturing Index 

-6.2

-4.5

-10.4

 

NZD

CPI (QoQ) 

0.3%

0.6%

0.3%

 Oct. 16

USD

Core CPI (MoM) 

0.1%

0.2%

0.1%

 

USD

CPI (MoM) 

0.6%

0.5%

0.6%

 

USD

CPI (YoY) 

2.0%

1.9%

1.7%

 

USD

Core CPI (YoY) 

2.0%

2.0%

1.9%

 

USD

TIC Net Long-Term Transactions 

90.0B

45.3B

67.2B

 

USD

Industrial Production (MoM) 

0.4%

0.2%

-1.4%

 Oct. 17

USD

Building Permits 

0.894M

0.810M

0.801M

 

USD

Housing Starts 

0.872M

0.770M

0.758M

Oct. 18

AUD

NAB Quarterly Business Confidence 

-2.00

 

-2.00

 

CNY

Chinese Fixed Asset Investment (YoY) 

20.5%

20.2%

20.2%

 

CNY

Chinese GDP (YoY) 

7.4%

7.4%

7.6%

 

CNY

Chinese Industrial Production (YoY) 

9.2%

9.0%

8.9%

 

CNY

Chinese Retail Sales (YoY) 

14.2%

13.2%

13.2%

 

USD

Initial Jobless Claims 

388K

365K

342K

 

USD

Continuing Jobless Claims 

3252K

3275K

3281K

 

USD

Philadelphia Fed Manufacturing Index 

5.7

1.0

-1.9

Oct. 19 

USD

Existing Home Sales 

4.75M

4.75M

4.82M

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. 24

01:30

AUD

CPI (QoQ) 

1.1%

0.5%

 

01:30

AUD

Trimmed Mean CPI (QoQ) 

0.6%

0.5%

 

02:45

CNY

Chinese HSBC Manufacturing PMI 

 

47.90

 

15:00

USD

New Home Sales

385K

373K

 

21:00

NZD

Interest Rate Decision 

2.50%

2.50%

Oct. 25 

22:45

NZD

Trade Balance 

-825M

-789M

Oct. 26 

00:30

JPY

Tokyo Core CPI (YoY) 

-0.5%

-0.4%

Government Bond Auction

Date Time Country 

Oct 22 09:10 Norway 

Oct 23 08:30 Spain 

Oct 23 14:30 UK 

Oct 23 17:00 US 

Oct 24 09:10 Sweden 

Oct 24 09:30 Germany 

Oct 24 14:30 Sweden 

Oct 24 15:30 Italy  

Oct 24 16:30 US 

Oct 25 00:30 Japan 

Oct 25 09:10 Sweden 

Oct 25 15:30 Italy  

Oct 25 17:00 US 

Oct 26 09:10 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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