USD/JPY Fundamental Forecast – September 16, 2016

The USD/JPY dipped 14 points to trade at 102.29 remaining well entrenched in its newer trading range between 101.90 to 102.50. The strong US dollar has been offset on prospects ahead of Bank of Japan meeting next week and safe haven demand. The Wall Street Journal reported that Japan’s subzero-rates policy has had a “powerful impact,” as Bank of Japan Gov. Haruhiko Kuroda recently said, in pushing down interest rates. But judging by the collateral damage—record low profits at Japanese banks, which are charged with transmitting the BOJ’s easy-money policy to stimulate the economy—it has likely gone a touch too far.

Signs have emerged that the central bank intends to steepen its yield curve—that is, push long-term rates up and suppress short-term rates. It has shifted around its bond purchases, buying more short-term Japanese government bonds and on the whole buying fewer bonds. Long-term rates rose are up almost half a percentage point since July. Yet even after the recent steepening, the difference between two-year bonds and 10-year bonds is half what it was before negative rates came into effect. (WSJ)

Japanese government bonds experienced their worst selloff in about 20 years. The real story here is the Bank of Japan is highly likely to implement maturity-range adjustment; this is the big change ahead. In plain English, this means that the Bank of Japan is looking into buying shorter-duration bonds and less longer-duration bonds. This is causing yields to rise on longer-duration bonds.

FxEmpire provides a wide variety of analysis on a daily, weekly and monthly basis ranging from our exceptional technical analysis as well as our in-depth fundamental analysis along with our daily news and market updates. To get the best understanding of each asset it is important to review the short term daily analysis with the longer term monthly reports. To get email notification when each of these are posted please sign up for our daily newsletter.

Upcoming Economic Events that you should be monitoring:

 September 16, 2016

Government Bond Auctions

Date Time Country Auction

Sep 15 10:30 Spain 0.75% Jul 2021 Bono, 1.3% Oct 2026 bond & 1.95% Jul 2030

Sep 15 10:50 France Eur 5-6bn 0% Feb 2019 & May 2021 OATs

Sep 15 11:03 Sweden Sek 0.5bn 0.125% Jun 2019 I/L & Sek 0.5bn 4% Dec 2020 I/L

Sep 15 11:50 France Eur 0.75-1.25bn 0.1% Mar 2021 & Mar 2025 OAT

Sep 19 11:00 Belgium Holds OLO auction

Sep 20 11:30 UK Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Holds bond auction

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction