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USD/JPY Weekly Fundamental Analysis, August 17 – August 21, 2015 Forecast

James Hyerczyk
Weekly USD/JPY
Weekly USD/JPY

Weekly Analysis and Recommendations:

The USD/JPY posted a number of volatile swings last week before closing lower. The volatile moves were triggered when the People’s Bank of China shocked the financial markets by devaluing the Yuan three consecutive sessions. The Greenback surged to a two-month high against the Yen on the central bank’s moves before China intervened to drive the U.S. Dollar lower. 

Also influencing the price action were the volatile swings in U.S. equity markets. Traders also reacted to the possibility the Fed will refrain from an interest rate hike in September. According to traders, there is a 50 percent probability the Fed will raise its benchmark rate in September, and 73 percent odds of a move by year-end. 

Barring any more surprise moves by the People’s Bank of China, the focus this week will be on Japan’s 2Q GDP report due out on Monday. The report is expected to show economic growth fell 0.5% last quarter, down from the first quarter’s 1.0% reading. The Preliminary GDP Price Index is expected to show a reading of 2.2%, down from the previous 3.4% reading. 

Economic data on Wednesday and Thursday are expected to produce the most volatility. Early Wednesday, the U.S. will release its latest consumer inflation data. This report is important because along with labor data, consumer inflation is a key factor in the Fed’s decision to raise rates. The report is expected to show the CPI held steady at 0.2%.This number may not be impressive enough to convince the Fed to raise rates, however. Last week, Federal Reserve Vice Chairman Stanley Fischer suggested a September rate hike is not a done deal because of low inflation. 

Also on Wednesday, the Fed will release its latest minutes. The minutes could reveal more insight as to the odds of a September rate hike. Some traders are already convinced that the Fed has taken an early rate hike off the table because of the actions by China last week. 

On Thursday, the Bank of Japan monetary policy statement will be followed by a press conference. On August 7, the BoJ kept its accommodative monetary policy, aiming toward 2% inflation without additional monetary easing. Economists, however, believe the 2% target may be changed, depending on the future outlook of oil prices. Because of last week’s Chinese yuan devaluation, this meeting will be watched more closely by investors. 

All data aside, the biggest influence on the USD/JPY over the near-term is likely to be the U.S. equity markets. Stock market weakness is likely to drive down the U.S. Dollar while stock market strength is likely to pressure the Japanese Yen. This is because of the carry trade. 

Empire 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 16

 7:50pm ET

JPY

 

Prelim GDP q/q

   

-0.5%

1.0%

 
   

JPY

 

Prelim GDP Price Index y/y

   

2.2%

3.4%

 

Mon Aug 17

8:30am ET

USD

 

Empire State Manufacturing Index

   

5.0

3.9

 
 

10:00am ET

USD

 

NAHB Housing Market Index

   

62

60

 
 

4:00pm ET

USD

 

TIC Long-Term Purchases

     

93.0B

 

Tue Aug 18

8:30am ET

USD

 

Building Permits

   

1.21M

1.34M

 
   

USD

 

Housing Starts

   

1.20M

1.17M

 
 

7:50pm ET

JPY

 

Trade Balance

   

-0.16T

-0.25T

 

Wed Aug 19

12:30am ET

JPY

 

All Industries Activity m/m

   

0.4%

-0.5%

 
 

8:30am ET

USD

 

CPI m/m

   

0.2%

0.3%

 
   

USD

 

Core CPI m/m

   

0.2%

0.2%

 
 

10:30am ET

USD

 

Crude Oil Inventories

     

-1.7M

 
 

2:00pm ET

USD

 

FOMC Meeting Minutes

         
 

Tentative

JPY

 

Monetary Policy Statement

         

Thu Aug 20

Tentative

JPY

 

BOJ Press Conference

         
 

2:45am ET

USD

 

FOMC Member Williams Speaks

         
 

8:30am ET

USD

 

Unemployment Claims

   

272K

274K

 
 

10:00am ET

USD

 

Philly Fed Manufacturing Index

   

7.2

5.7

 
   

USD

 

Existing Home Sales

   

5.45M

5.49M

 
   

USD

 

CB Leading Index m/m

   

0.2%

0.6%

 
 

10:30am ET

USD

 

Natural Gas Storage

     

65B

 
 

9:35pm ET

JPY

 

Flash Manufacturing PMI

     

51.2

 

Fri Aug 21

9:45am ET

USD

 

Flash Manufacturing PMI

   

53.5

53.8

 
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