FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
100,786,780Confirmed
2,164,282Deaths
72,793,457Recovered
Fetching Location Data…
Advertisement
Advertisement
James Hyerczyk
USD/JPY
USD/JPY

With no major reports from Japan this week, the movement in the Dollar/Yen has been largely influenced by two factors: a potential escalation of the global trade disputes and rising U.S. Treasury yields. Increased demand for risky assets also helped boost demand for the dollar.

Although the headlines have been warning that the global trade disputes will eventually lead to a slowdown in the global economy, we haven’t seen any evidence of this so far especially with the U.S. economy humming along nicely. If there were major concerns, investors would be seeking shelter in the safe-haven Japanese Yen, and the price action this week shows none of this. In fact it shows money is moving into the U.S. Dollar.

Advertisement
Know where the Market is headed? Take advantage now with 

75% of retail CFD investors lose money

At 0700 GMT, the USD/JPY is trading 111.533, down 0.071 or -0.06%.

Stronger-than-expected U.S. economic data and another jump in U.S. Treasury yields helped trigger a surge in the USD/JPY on Tuesday. This trend could continue today with the release of the U.S. Producer Price Index report. A rebound rally in technology shares also contributed to Tuesday’s rally. We could see a follow-through rally today on the back of potentially strong gains in shares of Apple stock.

In economic news, the National Federation of Independent Business (NFIB) reported that small business optimism jumped to a record high last month, boosted by lower taxes and looser regulations. The report showed its index climbing to 108.8, up from 107.9. Economists had forecast a move to 108.1.

Final Wholesale Inventories posted a 0.6% gain. This was a positive because it came in lower than the 0.7% estimate and previous month.

The JOLTS Job Openings report jumped to 6.94 Million. The previous month was revised upward to 6.82 Million. Investors were looking for a reading of 6.68 Million. U.S. job openings surged to a record high in July and more Americans voluntarily quit their jobs, pointing to sustained labor market strength and confidence that could soon spur faster wage growth.

Investors are also reacting to the widening of the spread between U.S. Government bonds and Japanese Government bonds. This is helping to make the U.S. Dollar a more attractive investment.

The highlight of Tuesday’s session was another jump in the yield on the benchmark U.S. two-year note, which hit its highest level since 2008 amid signs of a stronger economy and a slew of inflation data later this week.

The two-year yield hit 2.744 percent for the first time since July 2008. The yield on the benchmark 10-year Treasury note was higher at 2.974 percent, while the yield on the 30-year Treasury bond was up at 3.117 percent.

In other news, the U.S. Treasury Department auctioned $35 billion in three-year notes at a high yield of 2.821 percent. Other details showed the bid-to-cover ratio at 2.68. This is an indicator of demand. Indirect bidders, which include major central banks, were awarded 46.3 percent. Direct bidders, or domestic money managers, bought 10.7 percent.

Forecast

The Dollar/Yen should continue to pick up strength on Wednesday as long as there is demand for risky assets and U.S. Treasury yields continue to rise. However, the buying could get a little dicey as the Forex pair approaches a pair of tops at 111.770 and 111.830. These two tops are the gateway to the next major top at 112.152.

Rising stocks should continue to keep upward pressure on the USD/JPY. They could be boosted by another strong performance in Apple, which is expected to make a major announcement at a company marketing event.

Any announcement of new tariffs by the U.S. on China could cause some intra-day volatility, but this story has been out there for about a week so I think the news has been fully-priced into the market.

Investors are also watching another trade-related event. On Tuesday, China said it would approach the WTO next week to request permission to impose sanctions on the U.S. The meeting is scheduled to take place on September 21. The question is, are investors pricing this outcome into the market, or are they prepared to wait until September 21.

Today’s U.S. economic events could generate some volatility. At 1230 GMT, the Producer Price Index report is expected to show an increase of 0.2%. Core PPI is expected to have risen 0.2%. FOMC Member Brainard is scheduled to speak at 1645 GMT and the Fed will release its Beige Book at 1800 GMT.

The early price action on Wednesday suggests the direction of the USD/JPY today will be determined by trader reaction to 111.770 and 111.830. If buyers can’t make a run at these two tops then look for a possible pullback into 111.242.

Advertisement
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US