FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
63,051,523Confirmed
1,464,754Deaths
43,530,850Recovered
Fetching Location Data…
Advertisement
Advertisement
James Hyerczyk
USD/JPY

The Dollar/Yen closed higher last week with most of the gains attributed to a late session surge on Friday. Throughout the week, the Forex pair was rangebound. In fact, it has been range bound for 15 trading sessions. The price action suggests investors are content with interest rates and demand for risk at this time with investors showing little reaction to economic data.

Last week, the USD/JPY settled at 107.793, up 0.178 or +0.17%.

The price action has been unusual. With the spread between U.S. Government bond yields and Japanese Government bond yields historically tight, there is very little interest in the carry trade.

When the yield differential is wide, bullish stock market investors prefer to borrow at low rates from Japanese banks and invest in U.S. stocks. Essentially, when stocks go up, the USD/JPY goes up and vice-versa. We’re seeing very little of that relationship at this time even with U.S. stocks up over 30% from their March lows.

Safe-haven demand is also unclear. It seems to change every day. Given the sideways price action throughout most of May, it’s hard to tell if investors are buying the U.S. Dollar or the Japanese Yen for protection.

Our technical work indicates the trend is up. On May 6 the USD/JPY reached its low for the month at 105.987. And on May 19, it hit its high for the month.

During May, we found out that Japan entered a recession and the Bank of Japan committed to more stimulus, but prices hardly budged. The U.S. Federal Reserve held interest rates and stimulus steady, while the U.S. government talked about another aid package. Meanwhile, the economy lost more jobs, but as the month came to an end, the pace of the job losses had slowed.

Weekly Forecast

There are no major economic releases from Japan this week. In the U.S., traders will get the opportunity to react to ISM PMI reports on Manufacturing and Services. The key report, however, will be Friday’s U.S. Non-Farm Payrolls report.

But what can the NFP report actually tell investors that they don’t know already know? People lost jobs during the coronavirus shutdown.

Will we see volatile price action this week? Doubtful. Will the USD/JPY remain rangebound? Probably. We may not see any major movement until we start to see the economic data from the second quarter, which could mean a rangebound trade until July.

Unless the BOJ or Fed makes a major change in policy or U.S. yields or JGB yields spike unexpectedly in either direction, I’m anticipating another week of rangebound trading.

Friday’s price action was impressive. The USD/JPY posted a dramatic closing price reversal bottom after President Trump went easy on China late Friday. Perhaps improving relations between the United States and China will be the spark to trigger a breakout to the upside. At least it’s something to watch for while the paint dries.

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

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