USD/JPY Weekly Fundamental Analysis, October 20-24, 2014 Forecast

Weekly Analysis and Recommendation:

The USD/JPY reversed course late on Friday to gain as the US dollar added momentum and traders moved away from safety. The JPY is trading at 106.89. Japan’s incipient recovery is petering out after the hefty consumption tax increase in the second quarter sharply curtailed domestic spending, thereby putting the emerging inflation uptick at risk. The Prime Minister has indicated that additional stimulus measures will be forthcoming though, with longer-term fiscal reforms slow to emerge, the pressure will increase on the Bank of Japan to add to its bond buying program. These developments will reinforce an even weaker yen. Top Federal Reserve officials, in turn, have started worrying about how this sagging growth and market volatility have boosted the greenback, and so the country’s export competitiveness. A strong currency also suppresses inflationary pressures, meaning the Fed can hold back further on tightening its monetary policy.

Even as growth and deflation fears roil global markets and weak data casts a shadow over Japan’s economy, the Bank of Japan appears set to resist pressure for more stimulus measures or to accept that its inflation target is unrealistically high. People familiar with its deliberations said the BOJ, which has failed for two decades to drag Japan’s economy from the grip of no or zero inflation, is preparing to roughly halve its 1 percent economic growth forecast for this fiscal year, but stand pat on policy and its prediction that inflation will hit its 2 percent target in the year from next April.

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.

Historical: From 2011 to present

Highest: 110.11 on September, 2014

Average: 83.18 over this period

Lowest: 75.58 on Oct 31, 2011

 

Economic Highlights of the coming week:

Upcoming Government Bond Auctions

Date Time Country 

Oct 21 10:30 Spain 3 & 9M T-bill auction

Oct 21 11:00 Norway Bond auction

Oct 21 11:00 UK Auctions 2.75% 2024 Gilt

Oct 22 11:30 Germany Eur 2.0bn Aug 2046 Bund auction

Oct 23 11:03 Sweden I/L bond auction

Oct 23 17:00 US Announces 2/5/7Y Note & 2Y FRN auctions on Oct 28/29/30 & 29

Oct 23 17:30 Italy Announces details of BTPei/CTZ auctions on Oct 28

Oct 23 19:00 US 30Y TIPS auction

Oct 24 17:30 Italy Announces details of BOT auction on Oct 29