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JPY Well-Positioned as Latest Flurry of Central Bank Activity Disappoints

JPY Well-Positioned as Latest Flurry of Central Bank Activity Disappoints

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- USD/JPY loses range yesterday, eyes continuation below ¥122.00.

- GBP/JPY threatening trendline from October 2013.

- Read why a Fed rate hike in December may not be bullish for the US Dollar and see how it fits with the December seasonality forecasts.

It's been a rough few days for the US Dollar and global equity markets alike, as diminished stimulus expectations resulting from the ECB, the SNB, the BoE, and the RBNZ meetings over the past week take hold: the prospect that monetary policy won't be as loose as previously expected dampens demand for risk assets; and the lack of substantive policy action has resulted in once-favorable interest rate differentials turning against the US Dollar.

As I've discussed in the video portion of these reports the past few days, and likewise has been a big focal point of discussion in DailyFX on Demand, the Japanese Yen is heading into 2016 on strong footing. Monetarily, the BoJ is disinclined to act further as their current policies still course their way through the economy, which just exited recession territory. Fiscally, the foreign asset allocation undertaken by the Japanese Government Pension Investment Fund (GPIF) looks to be nearly complete. Economically, the Japanese current account just extended its surplus streak to 15 consecutive months through September 2015.

In sum, these conditions are not conducive to the previously ongoing financial and capital outflows that have led to Japanese Yen weakening over the past few months and years. With several of the major JPY-crosses at significant trend levels, it's worth watching to see if risk sentiment continues to dry up in the near-term.

Chart 1: GBP/JPY Daily Chart: April 2013 to Present

JPY Well-Positioned as Latest Flurry of Central Bank Activity Disappoints

See the above video for technical considerations in EUR/USD, GBP/USD, USD/JPY, NZD/USD, EUR/NZD, GBP/JPY and the USDOLLAR Index.

Read more: December Forex Seasonality Foresees Mixed US Dollar, S&P 500 Rally

Lastly, as we approach the holidays and thus less liquid markets through the end of the year, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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