USD/JPY Fundamental Daily Forecast – Week Begins With Investors in Defensive Mood

The Dollar/Yen is under pressure on Monday with investors on the defensive due to concerns over U.S. growth. Investors may be reacting to Friday’s mixed U.S. jobs report, which beat on the headline number, but missed on average hourly wages, a potential indication of slower growth.

Appetite for risky assets is also down. Traders are saying stock market investors may be paring positions ahead of the start of earnings season on Friday. Some investors may be taking profits on the premise that a U.S.-China trade deal may already be baked into the market.

At 06:21 GMT, the USD/JPY is trading 111.436, down 0.260 or -0.25%.

Traders may also be looking ahead to Wednesday’s U.S. Federal Reserve minutes, which may reveal just how concerned about the economy the central bank is.

Kuroda Speaks

While traders were reacting to dimmed appetite for risky assets, Bank of Japan Governor Haruhiko Kuroda said on Monday the country’s economy was expected to continue expanding moderately, although exports and output could feel the pinch from slowing overseas demand. He also stated that Japan’s financial system remained stable.

“Core consumer inflation is expected to gradually accelerate toward 2 percent as the output gap remains positive, and medium- to long-term inflation expectations heighten,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.

To recap what this means, “Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent in an effort to achieve its 2-percent inflation target,” according to Reuters.

Daily Forecast

Kuroda didn’t say anything that would drive the Japanese Yen higher. That move was caused by the shedding of risky assets. There isn’t an exact reason for the sharp decline in the USD/JPY, but probably a combination of a number of events. The move isn’t serious, but likely reflects global stock market investors’ desire to book profits ahead of key decisions over Brexit, U.S. and European economic data, Fed Minutes and U.S-China trade negotiations.

I don’t think the stock market is in trouble. Investors may have grown tired of buying strength and may be setting up for a correction into value territory. Also a drop in Treasury yields may also be signaling confirmation of the Fed’s dovish policy. Given last week’s U.S. and China manufacturing PMI data and U.S. jobs report, I don’t think lower rates are raising new concerns over a recession either.