USD/JPY Weekly Fundamental Analysis July 29 – August 2 Forecast

Weekly Analysis and Recommendation:

The USD/JPY eased well below the 100 level to close the week at 98.23 tumbling from the weekly high of 100.45. The dollar held at a five-week low and gold headed for its best month in over 1-1/2 years on Friday, after a report that the U.S. Federal Reserve will next week underline its intention to keep interest rates low for a long time. Moves by Fed officials to soothe concerns about its stimulus withdrawal plans have seen the dollar tumble this month as financial markets have bounced back strongly from June’s mild bout of panic. Against a basket of currencies the US dollar was down 0.2 percent but starting to claw back having earlier hit a 5-week low, while gold, often viewed as a hedge against Fed money-printing, consolidated its 10 percent rise this month.

After elections last weekend gave Prime Minister Abe’s a mandate to continue his aggressive policy to turn Japan from deflation to inflation. This week’s CSPI supported Abe’s moves. The U.S. dollar retreated against major currencies for a second day on Friday on expectations that the Federal Reserve will keep its monetary policy loose. The dollar once fell to a four-week low against the yen and five-week low against the euro as investors generally speculate that the Fed would not change its monetary stimulus measures at next week’s policy meeting.

The evidence on Abenomics is therefore mixed at best, and we need to see much further progress to materially lift a full year’s growth and beyond absent what we feel will be second-round negative effects to Abenomics through a relative price-shock via higher imported energy costs and electricity charges that short-circuits consumer prospects. That’s why analysts projected remain near the bottom of consensus on growth prospects for Japan’s economy into next year and why traders continue to think the country will fail to meet the doubled 2% inflation target set by the Bank of Japan. In fact, the forecast rates of growth for Japan’s economy this year and next are below the growth rates of the three years prior to the introduction of Abenomics. What BoJ Governor Kuroda thinks of all of this amid ongoing doubts over the cohesiveness of policy makers at both the BoJ and Japan’s Diet within a historically highly divided LDP may matter in his speech early in the week.

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 July 22-26 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

Government Bond Auction

Date Time Country 

Jul 29 09:10 Italy

Jul 29 10:30 Belgium

Jul 30 00:30 Japan

Jul 30 09:10 Italy

Jul 30 09:30 Belgium

Jul 30 14:30 UK

Jul 31 09:30 Germany

Jul 31 13:00 US

Aug 01 00:30 Japan

Aug 01 08:50 France

Aug 01 11:00 Norway