USD/JPY Fundamental Analysis December 18, 2013 Forecast

Analysis and Recommendation:

The USD/JPY is trading at 103.00 this morning moving between small gains and losses as the US Federal Reserve meeting is slated to start in just a few hours. The prospect of tapering by the US Fed is keeping traders on edge. The dollar was within 1 percent from a five-year high versus the yen as the Federal Reserve begins a two-day meeting today and before data forecast to show inflation picked up November. While 34 percent of economists surveyed by Bloomberg forecast the Fed will reduce its $85 billion in monthly bond purchases at a two-day meeting starting today, futures traders bet it will keep interest rates near zero at least until the end of 2014.

Traders see an 87 percent chance that the U.S. central bank will keep the federal-funds rate target at zero to 0.25 percent through next year, according to data on futures compiled by Bloomberg.

The consumer-price index for the U.S. rose 0.1 percent in November, following a 0.1 percent drop the previous month, economists surveyed by Bloomberg News forecast before today’s report. Excluding volatile food and fuel, the so-called core measure also rose 0.1 percent, the poll showed.

Japan’s exporting powerhouses may have gotten a huge boost from the weaker yen, but those stocks may be the worst plays on the country’s recovery, a fund manager said. “Just because the yen is weak doesn’t mean to buy exporters,” said Nicholas Weanling, the manager of JPMorgan’s Japan Yen fund, which has around $277.8 million under management. “It’s the biggest misconception. It’s exactly where we think you shouldn’t be investing right now.” Japan’s big exporters face a structural decline in key products, such as cameras, printers and copiers as the ascendance of smartphones and tablet computers weighs on demand.

The outcome of continued Japanese monetary easing, coupled with only lackluster results achieved so far in stimulating the economy under Shinzo Abe’s government in power now for nearly a year, is almost certain to be a further prolonged fall in the yen. Watch out for a slide from the current 103 to the dollar to perhaps as low as 110 — a figure that could test how far the Japanese authorities wish to see the currency decline before sparking potential inflationary dangers.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data December 17, 2013 actual v. forecast

 

Upcoming Economic Events that affect the AUD, NZD, JPY and USD

Government Bond Auction

Date Time Country 

Dec 18 18:00 US

Dec 19 09:30 Spain

Dec 19 18:00 US

Dec 20 16:30 Italy