USD/JPY Fundamental Analysis – September 15, 2015 – Forecast

Analysis and Recommendations:  The USD/JPY closed lower on Monday in a session which saw U.S. Dollar under pressure against the Japanese Yen from the opening.

The catalyst behind the selling pressure was weaker global equity markets. The selling started early in Asia then spread to Europe and the U.S. as traders reacted to a slew of Chinese economic data released over the week-end and on uncertainty ahead of the Federal Open Market Committee meeting on September 16 – 17.

China’s fixed-asset investment and industrial production missed expectations in August. According to the National Bureau of Statistics, industrial production posted a reading of 6.1% versus an estimate of 6.3%. Fixed Asset Investment came in at 10.9%. Traders were looking for a reading of 11.2%. Chinese retail sales were slightly better than the estimate at 10.8%. Investors had priced in a gain of 10.6%.

The weaker data suggests further cooling in the economy that will likely lead to additional stimulus measures from the government. More stimulus from the government also puts pressure on Fed members to refrain from a rate hike on September 17. Because of the struggling Chinese economy and its impact on global economies, the FOMC is likely to signal that it will begin tightening soon, but it will pass on a rate hike in September. Last week, the IMF and World Bank expressed their reservations with a rate hike at this time. This is also likely to influence Fed members.

China’s Shanghai Composite index closed down 2.7 percent to its lowest level since September 8 in reaction to the economic data. Japan’s Nikkei 225 Index turned significantly lower, piggy-backing the sell-off in China.

The Bank of Japan begins its two-day policy meeting. Analysts are looking for the central bank to maintain its expansionary monetary policy, though signs of persistent weakness in the economy are putting pressure on the central bank to implement further easing. The most likely date for this is October 30.

Although Japan’s economy is struggling to gain momentum after a contraction last quarter, most economists don’t see the central bank expanding monetary stimulus until its October 30 meeting. The BoJ is under pressure to act because of low inflation and declines in production. A slowdown in China also risks hurting exports. The key as to whether the central bank expands stimulus this week or on October 30 will be how it reads the current situation in China. BoJ members have to consider China’s currency devaluation last month, volatile stock markets and weaker-than-expected economic indicators in Japan. 

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.

Today’s economic releases:

           Date                      Time              Curr                                     Event                                                    Forecast   Previous

 

Government Bond Auctions

Date     Time               Country

Sep 16 11:03 Sweden Holds bond auction

Sep 16 11:30 Germany Eur 2bn 2.5% Aug 2046 Bund

Sep 16 11:30 UK Auctions 2% 2025 Gilt

Sep 17 10:30 Spain Auctions Bonos/Obligaciones

Sep 17 10:50 France Auctions BTANs

Sep 17 11:50 France Auctions OATi

Sep 17 19:00 US Holds 10-year TIPS auction

Sep 21 12:00 Belgium Auctions OLOs