USD/JPY Weekly Fundamental Analysis, December 7 – December 11, 2015 Forecast

Weekly Analysis and Recommendations: 

USD/JPY Close 123.096, +0.2740, +0.22%

The USD/JPY had a volatile week, but still managed to close higher. Early in the week, the Forex pair was driven into its highest level since November 18, but this rally didn’t last because of the plunge in U.S. equity markets on December 3.

Investors sold equities then bought the Japanese Yen as they reacted negatively to the dovish news from the European Central Bank. The U.S. Dollar recovered, however, on December 4 with the release of the stronger-than-expected U.S. Non-Farm Payrolls report.

The U.S. jobs report removed a lot of the uncertainty that had been hovering over the market regarding the Fed rate hike. The lifting of the uncertainty over the December 16 rate hike helped stocks rebound as well as the USD/JPY. The uncertainty now shifts to the timing of future rate hikes.

This week’s price action will be dictated by a blend of U.S. and Japanese economic data. The week begins with commentary from Bank of Japan Governor Kuroda. This is followed closely by Japan’s Final GDP reading. It is expected to show the economy grew by 0.1%, better than the previous -0.2% reading.

U.S. reports include the JOLTS Job Openings report at 10:00 am. ET on December 8, Import Prices on December 10 and Retail Sales on December 11. This report is expected to show a 0.2% rise.

FOMC member and Fed hawk Bullard is expected to make comments shortly before the official pre-market blackout. Although economic conditions may have deteriorated slightly since the last Fed meeting, conditions haven’t changed enough to call off a Fed rate hike. Bullard is expected to reiterate Janet Yellen’s stance that the rate hike is ready for “liftoff”.

The USD/JPY should continue to be one of the most volatile Forex pairs. There is a strong upside bias because of the divergence between the monetary policies of the Fed and the Bank of Japan. However, the Forex pair is still likely to be influenced by the action in the stock market. With stocks bumping up against highs and coming off of a huge mid-week break, USD/JPY traders should prepare this week for excessive stock market-driven volatility and the possibility of a two-sided trade.

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: 

         Date                 Time          Curr                                      Event                                                                    Forecast  Previous

 

Upcoming Government Bond Auctions 

Date Time Country

Dec 07 13:00 Norway Details bond auction on 09 Dec

Dec 07 17:30 Italy Announces details of BTP/CCTeu on 11 Dec

Dec 08 11:30 UK 3.5% 2045 Gilt auction

Dec 08 19:00 US Holds 3-year note auction

Dec 09 11:03 Sweden Holds bond auction

Dec 09 11:05 Norway Holds bond auction

Dec 09 11:30 Germany Eur 3bn Dec 2017 Schatz

Dec 09 19:00 US Holds 10-year note auction

Dec 10 19:00 US Holds 30-year bond auction

Dec 11 11:10 Italy Auctions BTPs/CCTeus