USD/JPY Weekly Fundamental Analysis August 19 – 23, 2013 Forecast

Weekly Analysis and Recommendation:

The USD/JPY ended the week at 97.58 trading in a tight range over the week from a low of 95.98 to a high of 98.43 but remained in the center of the range for most of the week. The Japanese yen was held slightly above the fresh one-week lows but has been underperforming in recent weeks on Nikkei selling, uncertainty in consumption tax rate hike and compounded by surging US Treasury yields which are near multi-year highs. The slower GDP in Q2 to an annualized 2.6% compared with a revised +3.8% in Q1 raised concern that it could derail Japan’s plans to raise taxes and pare back soaring government debt, which reached one quadrillion yen, or US$10.3trillion, more than twice the size of its economy.

The levy on consumption is due to be raised to 8% in April 2014, from 5%, followed by an increase to 10% in October 2015. The government has said it will decide on the matter after the revised GDP data that will be released on 9 September. Asian currency was struggling to find foothold against the dominant US dollar and remained vulnerable to outflows. Singapore dollar topped the chart with a 0.6% lost against US dollar, traded above 50-SMA rate of 1.2662 despite the GDP growth upgrade from 1%-3% to 2.5%-3.5% after the economy expanded by 2% in the first half of 2013.

The Japanese Yen slipped this past week as concerns over ‘Abenomics’ and tax policy heated up as the world’s third-largest country’s debt level jumped past ¥1 quadrillion (roughly $10.3 trillion). Prime Minister Shinzo Abe appears to be stuck between a hard place and a rock as a rise in the sales tax heightens the risk of seeing a slower recovery, and the fiscal outlook may persistently dampen the appeal of the Yen as the new government struggles to draw up a credible solution to address the risks surrounding the region. In turn, the Bank of Japan (BoJ) may come under increased pressure to further embark on the easing cycle over the coming months, but Governor Haruhiko Kuroda may have little choice but to use verbal intervention to encourage an export-led recovery as there appears to be a growing rift within the central bank.

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.

Major Economic Events for the week of August 12 – 16 actual v. forecast for Yen, the Aussie, the Kiwi and USD

Historical: From 2010 to present

Highest: 94.99 on May 05, 2010

Average: 82.77 over this period

Lowest: 75.58 on Oct 31, 2011

 

Economic Highlights of the coming week that affect the AUD, JPY, NZD and USD