USD/JPY Monthly Fundamental Forecast June 2014

Outlook and Recommendation

The USD/JPY hit a low of 100.83 earlier this month to close at 101.77 dead center of its trading range. The currency had a lot of factors to deal with this month. The stronger US dollar, the Bank of Japan and safe haven trades after the conflict in the Ukraine escalated.  The April 1st increase in the consumption tax rate is reflected in Japan’s current economic momentum. In anticipation of the raise, the retail sales indicator jumped (6.4% m/m) in March, followed by a sharp contraction of 13.7% m/m in April. The government aims to offset the tax hike’s adverse impact on household spending in the current quarter by supplementary public infrastructure spending. Nevertheless, we expect real GDP growth to contract in quarter-over-quarter terms in the second quarter (after a 1.5% q/q gain in Q1), with an output expansion of 1.4% for this year as a whole. At the May 21st monetary policy meeting, the members of the Policy Board of the Bank of Japan (BoJ) unanimously agreed to maintain the current policy stance of expanding the nation’s monetary base by ¥60-70 trillion annually

The offsetting impacts of low FX market volatility, falling global yields and moderating geopolitical risk are limiting movement in the JPY as technical signals provide for no clear trend. Frustrated JPY bears have pared back their positions, narrowing the CFTC net short position to $6.6bn as of May 20th – its narrowest level in 18 months.

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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name – The Bank of Japan

Date of next meeting or last meeting: June 13, 2014

Current Rate: 0.10%

Economic events for the month of February affecting AUD, JPY, NZD and USD