USD/JPY Weekly Fundamental Analysis September 17-21, 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 bounced back up on Friday to trade at 78.39 with the pair locked back in the tight range in the lower 78. The pair had fallen as low as 77.14 as the USD weakened as markets hopes for stimulus from the Feds. After Mr. Bernanke’s announcements markets rejoiced in the depth of the program offered, and the USD collapsed against most of the crosses, except against the JPY.

Asian markets will be principally driven by the global market tone in the wake of the Fed and given Eurozone risks over the upcoming week, but several first-tier regional factors pose additional local market risk.  China risk returns following a wave of soft growth and inflation figures that are prompting stimulus talk.  This time it lands in the form of the private version of China’s purchasing managers’ index for the manufacturing sector which has been in contraction throughout the year.  It has recently been joined in contraction by a contracting state’s manufacturing PMI.  Japan’s Democratic Party holds a leadership vote at the end of the week, and this will pit Prime Minister Yoshihiko Noda against three contenders.  Noda is the favorite as Japan gears up for elections as soon as next month, and the polls are not being kind to his party in part due to his decision to sharply raise the sales tax rate in order to fund the country’s massive debt position. 

The Bank of Japan also makes a rate decision against this highly politicized back-drop, and has been under enormous pressure to debase a strong yen.  The Reserve Bank of India is expected to keep its policy rate unchanged next week. The RBA minutes and New Zealand GDP round out the week’s regional news.

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 10-14, 2012 actual v. forecast for Yen, the Aussie, the Kiwi and US

Historical: From 2010 to present

Highest: 94.99 on May 05, 2011

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 

Sep 17 09:10 Slovakia

Sep 17 10:00 Norway 

Sep 18 08:30 Spain 

Sep 18 09:10 Greece 

Sep 18 09:30 Belgium 

Sep 19 09:10 Sweden 

Sep 19 09:30 Germany 

Sep 19 09:30 Portugal 

Sep 19 10:00 Norway 

Sep 20 08:30 Spain 

Sep 20 08:50 France 

Sep 20 09:30 UK 

Sep 20 09:50 France 

Sep 20 15:00 US 

Sep 20 17:00 US 

Sep 21 15:30 Italy