USD/JPY Weekly Fundamental Analysis, August 3 – August 7, 2015 Forecast

Weekly Analysis and Recommendations:

The USD/JPY finished slightly better last week on lackluster trading. The Forex pair posted an outside move which tends to indicate trader indecision. Bullish traders are being driven by the strong possibility of an interest rate hike by the Fed in September. Bearish traders are looking at the possibility of increased carry trade selling related to stock market selling. 

With the possibility of a September Fed rate hike on the minds of investors, the primary focus this week will be on the Friday, August 7 U.S. Non-Farm Payrolls report. This is because the Fed cited the improving labor market as one reason why it is leaning towards raising interest rates. Early estimates are predicting the economy added 224K new jobs in July. 

A substantially higher number will increase the odds of a September rate hike. This would be bullish for the U.S. Dollar. A substantially lower number will likely take a September hike off the table, forcing traders to price in a December rate hike. Gains and losses will be limited, however, by the price action in the U.S. stock market. A lower market will be supportive for the Japanese Yen. A higher stock market will likely underpin the USD/JPY. 

On August 6, the Bank of Japan will release its monetary policy statement. It is likely to leave monetary policy unchanged, but may reference the weak Japanese Yen and its impact on the economy. 

The wildcard this week remains the Chinese stock market. Another collapse in Chinese equities could send the USD/JPY plunging as investors are likely to plow into the safe-haven Japanese Yen. 

Look for sideways action early this week unless the U.S. equity markets make a definitive move in either direction ahead of Friday’s jobs report. A big increase in non-farm payrolls will be bullish for the USD/JPY. A sizable miss will be bearish for the USD/JPY. Of course, the direction of the stock market will also influence the Forex pair. Sharply lower prices will be bullish for the Yen. 

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. 

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