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USD/JPY Fundamental Daily Forecast – Yen Should Benefit from Risk-Off Sentiment

By:
James Hyerczyk
Updated: Jun 30, 2022, 09:33 UTC

Powell’s hawkish tone is likely to continue to influence the price action along with a slowing economy and aggressive interest rate hikes.

USD/JPY

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The Dollar/Yen is edging lower on Thursday after surging to a multi-year high the previous session. Perhaps weighing on the greenback is another drop in U.S. Treasury yields although some believe the higher the Forex pair moves, the greater the chances of a Japanese government intervention. A shift in investor sentiment to risk-off should also make the Japanese Yen more attractive.

At 08:58 GMT, the USD/JPY is trading 136.245, down 0.355 or -0.26%. On Wednesday, the Invesco Currency Shares Japanese Yen Trust ETF (FXY) settled at $68.56, down $0.18 or -0.27%.

US Recession Expectations Rise

U.S. Treasury yields declined for a second consecutive day on Wednesday as the market took a cool view of the Federal Reserve’s ability to corral inflation without throwing the economy into recession.

Traders Expecting BOJ to Resume Bond-Buying

Japanese government bond yields fell on Thursday, as investors awaited the Bank of Japan’s bond-buying plans for the July-September period due later in the day for which expectations were divided.

Focus is on whether the central bank will boost the amount of bonds with longer maturities it would offer to buy, as yields on the longer ends of this week rose to their highest in more than six years, according to Reuters.

Looking Ahead …

Traders on Thursday will monitor a fresh batch of economic data. Initial jobless claims for the week-ending June 18, personal income figures for May and consumer spending data for May will be released at 12:30 GMT.

The core personal consumption expenditures price index – the Fed’s preferred inflation gauge – will be released at the same time, while the Chicago Purchasing Managers’ Index for June is scheduled to be published at 13:45 GMT.

Daily Forecast

Fed Chair Powell’s hawkish tone is likely to continue to influence price action on Thursday along with a general concern over a slowing economy and aggressive interest rate hikes.

Powell on Wednesday said that policymakers would not allow inflation to take hold of the U.S. economy over the longer term.

Powell also said it’s important to arrest long-term inflation expectations so that they don’t become entrenched and create a self-fulfilling cycle.

The primary focus for traders is Powell’s acknowledgement that raising rates could cause a recession. If this news gains traction, traders may seek shelter in the Japanese Yen, which would put pressure on the USD/JPY.

For a look at all of today’s economic events, check out our economic calendar.

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.

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