USD/JPY Weekly Fundamental Analysis, August 24 – August 28, 2015 Forecast

Weekly Analysis and Recommendations:

Last week’s sell-off by the USD/JPY was all about risk aversion. The huge sell-off in the U.S. equities markets forced investors out of the U.S. Dollar and into the Japanese Yen due to the carry trade. Under bullish conditions, investors borrow cheaply from Japanese banks, convert the Yen to U.S. Dollars and invest in U.S. stocks. During bearish conditions, investors liquidate their stock positions but have to pay back their loans in Yen. They do this by selling dollars and buying Yen. 

If stocks continue to break then look for the USD/JPY to continue to weaken. Stocks are falling for various reasons. Some investors feels that overbought technical conditions are driving the market lower, some feel that an impending rate hike by the Fed is the reason for the weakness and other believe that the struggling economy in China is to blame for the selling pressure.

 The U.S. Dollar/Japanese Yen Forex pair is likely to remain under the influence of the stock market movement this week despite a few key U.S. economic reports. These include consumer confidence, durable goods, home sales and preliminary GDP. 

Simply stated, if stocks mount a recovery then look for the USD/JPY to rally this week. If stocks continue to sell-off then look for the Forex pair to weaken further. 

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. 

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