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USD/JPY Fundamental Weekly Forecast – Could Be Pressured by Safe-Haven Demand for Yen Due to Trade Issues

By:
James Hyerczyk
Published: Sep 3, 2018, 03:35 UTC

This week, the emphasis will once again be on the Japanese Yen’s role as a safe haven currency. The USD/JPY could face extended selling pressure if the dollar is pressured by trade dispute jitters. Or it could be supported somewhat by robust U.S. economic data.

JPY Notes

The Dollar/Yen Forex pair started the week strong, but ended on a weak note as the Japanese Yen battled the U.S. Dollar for safe-haven supremacy amid renewed global trade concerns.

For the week, the USD/JPY settled at 111.109, down 0.159 or -0.14%.

The greenback was supported early in the week after the United States and Mexico announced a new trade deal. This news weakened the Japanese Yen’s appeal as a safe-haven asset.

Strong U.S. economic data also helped support the USD/JPY. Preliminary U.S. Third Quarter GDP exceeded expectations, increasing the chances of a Fed rate hike in September and December.

Contributing to the weakness later in the week was a failure by the U.S. and Canada to reach a new trade deal although they will return to the negotiation table next Wednesday.

Perhaps the biggest factor driving the Dollar/Yen lower late in the week was concern about an escalation in the U.S.-China trade dispute after fresh threats by U.S. President Donald Trump.

Forecast

This week, the emphasis will once again be on the Japanese Yen’s role as a safe haven currency. The USD/JPY could face extended selling pressure if the dollar is pressured by trade dispute jitters. Or it could be supported somewhat by robust U.S. economic data.

According to Bloomberg, President Trump is prepared to ramp up the trade dispute with China and has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends next week.

Traders will also get the opportunity to react to a slew of U.S. economic reports that could determine the pace of future U.S. Federal Reserve interest rate hikes.

On Tuesday, the U.S. will report on ISM Manufacturing PMI. It is expected to come in at 57.6, slightly below the previously reported 58.1.

Thursday will feature the ADP Non-Farm Employment Change report. It is expected to show the private sector added 188K jobs in August. This is down slightly from the 219K increase in July. ISM Non-Manufacturing PMI is forecast at 57.0, up from 55.7.

Friday will feature the most important U.S. Non-Farm Payrolls report. The headline number is forecast to show the economy added 191K jobs in August, up from 157K. The Unemployment Rate is expected to have held steady at 3.9%. Average Hourly Earnings, a key indicator of inflation, is expected to show a 0.3% increase, matching last month’s increase.

The main event out of Japan this week is a Monday speech by Bank of Japan Governor Kuroda.

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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