Advertisement
Advertisement

USD/JPY Fundamental Daily Forecast – Concerns Over Italy Driving Investors into Safe Haven Japanese Yen

By:
James Hyerczyk
Published: Sep 28, 2018, 12:15 UTC

Despite expectations of rising interest rates in the U.S. and strong economic data, the USD/JPY could be pressured throughout the session today if the situation between Italy and the Europe Union continues to escalate.

JPY Notes

The Dollar/Yen is trading lower after giving up earlier gains. The Forex pair was driven higher earlier in the session by the widening of the spread between U.S. Government bond yields and Japanese Government bond yields. This move was being supported by the divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Bank of Japan.

However, the direction of the Dollar/Yen reversed on safe-haven buying that was driven by a steep drop in the Euro. Essentially, geopolitical turmoil between Italy and the European Union is driving some investors into the safety of the Japanese Yen.

At 1154 GMT, the USD/JPY is trading 113.349, down 0.049 or -0.04%. The high reached earlier in the session is 113.660. This high fell between the December 21, 2017 top at 113.631 and the December 12, 2017 top at 113.745.

In other news, Japan’s unemployment rate fell 0.1 percent from the previous month to 2.4 percent. The country also saw an increase in its month-on-month industrial output in August, while retail sales in August was higher as compared to a year earlier.

To summarize, Tokyo Core CPI was up 1% versus 0.9%. The unemployment rate was 2.4% versus 2.5% and Preliminary Industrial Production came in at 0.7%, lower than the 1.5% forecast.

Retail Sales were up 2.7% versus the 2.2% forecast. Housing Starts jumped 1.6% against a 0.4% estimate.

In the Bank of Japan’s release of its summary of opinions for its meeting earlier in September, the central bank said “the contrast between the favorable U.S. economy and other economies is becoming more evident, mainly reflecting U.S. trade policy, and uncertainties regarding their outlook have been heightening as well.”

Forecast

Despite expectations of rising interest rates in the U.S. and strong economic data, the USD/JPY could be pressured throughout the session today if the situation between Italy and the Europe Union continues to escalate.

If worries in Europe dampen then traders will get the opportunity to react to a slew of U.S. economic data including the Core PCE Price Index, Personal Spending, Personal Income, Chicago PMI and University of Michigan Consumer Sentiment.

The Core PCE Price Index is expected to increase 0.1%. This should put annual inflation over the Fed’s 2 percent target. Personal Spending is expected to rise 0.3%. Personal Income is forecast to rise 0.4%.

Chicago PMI is forecast to come in at 62.3 and Consumer Sentiment is expected to have dropped slightly from 100.8 to 100.5.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement