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USD/JPY Weekly Fundamental Analysis, August 10 – August 14, 2015 Forecast

James Hyerczyk
USDJPY

Weekly Analysis and Recommendations:  The USD/JPY may have finished slightly higher on the weekly chart, but Friday’s price action suggests the Forex pair may see some early selling pressure next week. 

Last week, U.S. Non-Farm Payrolls came largely in line with market expectations for July. The labor market added 215K jobs in July, slightly below the 223K estimate. The July NFP came with an upward revision of 8,000 for last month – rising to 231K from 223K. The unemployment rate stayed stable at 5.3%.

 After the report, the odds for a September rate hike shifted from 47 percent to 55 percent. The number stands at 100 percent for a December rate hike. This being said, the Dollar still weakened against the Japanese Yen. Investors shouldn’t get too caught up in the price action, however, because it doesn’t change the fact that the Fed is on a path to raise interest rates before the end of the year. 

The problem is the timing of the rate hike. Therefore, Friday’s sell-off may have just been caused by positon-squaring by investors choosing to take profits or reduce positions at current price levels. They, like Fed members, are probably waiting for more data so the emphasis between now and the mid-September Fed meeting will continue to be on labor and consumer inflation data.

 Also influencing the price action is the U.S. stock market. This is because of the carry-trade. Recent price action suggests that portfolio managers are no longer buying the dips. If the selling pressure continues then these managers will likely use the proceeds to pay back loans borrowed from Japanese banks. In doing so, they will have to convert Dollars to Yen, putting pressure on the USD/JPY. 

So while a Fed rate hike will be supportive for the U.S. Dollar because of the interest rate differential, it could also trigger a steep break in the stock market which would be bearish for the USD/JPY because of the carry trade. Given the size of the six-year stock market rally, the Forex pair is reacting as if the carry trade is going to have more of a short-term impact on the U.S. Dollar/Japanese Yen relationship rather than the interest rate differential. 

Look for follow-through selling pressure early in the week because of the bearish chart pattern on Friday. Watch for the selling pressure to increase if the stock indices continue to break. 

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. 

Weekly USD/JPY

        Date                  Time            Curr                              Event                                                                           Forecast Previous 

Sun Aug 9

 7:50pm ET

JPY

 

Current Account

   

1.41T

1.64T

 

Mon Aug 10

7:15am ET

USD

 

FOMC Member Fischer Speaks

         
 

9:00am ET

USD

 

FOMC Member Lockhart Speaks

         
 

12:25pm ET

USD

 

FOMC Member Lockhart Speaks

         

Tue Aug 11

8:30am ET

USD

 

Prelim Nonfarm Productivity q/q

   

1.6%

-3.1%

 
   

USD

 

Prelim Unit Labor Costs q/q

   

-0.1%

6.7%

 
 

11th-13th

USD

 

Mortgage Delinquencies

     

5.54%

 
 

7:50pm ET

JPY

 

Monetary Policy Meeting Minutes

         

Wed Aug 12

10:00am ET

USD

 

JOLTS Job Openings

   

5.42M

5.36M

 
 

10:30am ET

USD

 

Crude Oil Inventories

     

-4.4M

 
 

7:50pm ET

JPY

 

Core Machinery Orders m/m

   

-4.9%

0.6%

 

Thu Aug 13

8:30am ET

USD

 

Core Retail Sales m/m

   

0.5%

-0.1%

 
   

USD

 

Retail Sales m/m

   

0.5%

-0.3%

 
   

USD

 

Unemployment Claims

   

272K

270K

 
   

USD

 

Import Prices m/m

   

-1.0%

-0.1%

 

Fri Aug 14

8:30am ET

USD

 

PPI m/m

   

0.1%

0.4%

 
   

USD

 

Core PPI m/m

   

0.1%

0.3%

 
 

9:15am ET

USD

 

Capacity Utilization Rate

   

78.0%

78.4%

 
   

USD

 

Industrial Production m/m

   

0.3%

0.3%

 
 

10:00am ET

USD

 

Prelim University of Michigan Consumer Sentiment

   

93.5

93.1

 
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