USD/JPY Fundamental Analysis – January 11, 2016 – Forecast

Analysis and Recommendation:

The USD/JPY added 61 points as markets readjusted from Thursday’s trading stress after the Chinese turned off their circuit breaker. The US dollar regained its composure as commodity currencies rebounded. The yen is trading at 118.28. U.S. crude futures dropped more than 5% in early trade to just above $32 per barrel — the lowest since December 2003 — before steadying slightly. By early afternoon, prices had recovered to about $33.5 per barrel.

This followed a drop of 6% on Wednesday. Brent crude, another global benchmark, was also trading at $33.

Thursday’s move came as trading in Chinese stocks was halted for the second time this week after mainland markets fell by 7%.

Trading on Thursday was all about safety sending the yen into the 117 price level but the announcement from Chinese regulators that they were suspending the new circuit breaker as it was not functioning as expected began to relieve global fears. There was little data in the Friday morning session but the easing of stress allowed the yen to ease from its recent levels.

Investors are also alarmed by the decline in China’s currency. The country’s central bank set the yuan’s value at the weakest level since March 2011. The currency devaluation may help boost growth, but it can hurt asset values and cause money to exit the country.

To that point, China’s central bank said it burned through a record $108 billion in foreign-exchange reserves in December in an effort to slow the sharp devaluation of its currency.

While investors should focus on China’s economy, not its turbulent equity market, the economy isn’t looking great either. New reports released this week reinforce concerns that China is slowing down more than investors realized.

FxEmpire provides in-depth analysis for each asset 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, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Monday, January 11, 2016

Government Bond Auctions

Date Time and Country

Jan 12 11:00 Austria Holds bond auction

Jan 12 11:00 Netherlands Euro 1-1.5bn 2.5% 2033 DSL

Jan 12 11:30 UK 0.125% 2046 Inflation-linked Gilt

Jan 12 n/a UK Announces details of Gilt auction on Jan 20

Jan 12 19:00 US Holds 3-year note auction

Jan 13 11:05 Norway Holds bond auction

Jan 13 11:10 Italy Holds BTP

Jan 13 11:30 Germany Euro 5bn Feb 2026 Bund

Jan 13 19:00 US Holds 10-year note auction

Jan 14 10:30 Spain Auctions Bonos/Obligaciones

Jan 14 19:00 US Holds 30-year bond auction

Jan 14 N/A US Announces details of 10-yr TIPS auction on Jan 21

Jan 18 11:00 Belgium Holds OLO auction