News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bullish
Wall Street
Mixed
Gold
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • Dollar Index remains above 90 as US equities put in a strong session $USD $DXY https://t.co/nKrGpulwmN
  • Commodities Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Silver: 2.28% Gold: 1.47% Oil - US Crude: -0.15% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/fkusw10RZZ
  • EUR/USD carves a series of higher highs and lows ahead of the European Central Bank’s (ECB) first meeting for 2021. Get your $EURUSD market update from @DavidJSong here:https://t.co/XXMha8V8dD https://t.co/r7RYOc1u6r
  • Silver noticeably higher during trade, now up over 2% $XAG $USD https://t.co/5G4QlzCdja
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 100.00%, while traders in Wall Street are at opposite extremes with 66.19%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/MegXLHg0tp
  • Canadian #Dollar Outlook: $USDCAD BoC Breakdown– #Loonie Levels - https://t.co/3SVBLyMZTI https://t.co/9SzmpyXplC
  • Indices Update: As of 19:00, these are your best and worst performers based on the London trading schedule: US 500: 1.39% Wall Street: 0.76% FTSE 100: 0.18% Germany 30: 0.15% France 40: 0.15% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/zBiMtLXZXw
  • US indices remain up following Biden's inauguration, with the S&P and Nasdaq hitting fresh all time highs today. DOW +0.76% NDX +1.83% SPX +1.33% RUT +0.12% $DOW $QQQ $SPY $IWM
  • USD/CAD falls to session lows as Loonie gains immediately after the BoC rate decision. Get your $USDCAD market update from @RichDvorakFX here:https://t.co/4s6kKsljCm https://t.co/FTdgwIL8cF
  • $EURJPY is trading below 125.50 today after attempting to stage a recovery yesterday. The pair had climbed back above 126.00 yesterday after falling to around 125.10, its lowest level since early December, during Monday trading. $EUR $JPY https://t.co/4mWhO9rIzA
After July NFPs Miss, Japanese Yen Set to Extend Gains if BoJ Holds

After July NFPs Miss, Japanese Yen Set to Extend Gains if BoJ Holds

Christopher Vecchio, CFA, Senior Strategist
After_July_NFPs_Miss_Japanese_Yen_Set_to_Extend_Gains_if_BoJ_Holds_body_Picture_1.png, After July NFPs Miss, Japanese Yen Set to Extend Gains if BoJ Holds

Fundamental Forecast for Japanese Yen: Neutral

The Japanese Yen finished in the middle of the pack last week, but dropped by less than one percent against the top performers as a late-Friday surged helped boost the Yen crosses. TheUSDJPY closed the week higher at ¥98.94, up by +0.74%, after a run at triple digits was thwarted by a weak July US labor market report. With it looking less likely that the Federal Reserve will begin to taper QE3 at its September meeting, the Yen’s fundamental footing next to the US Dollar has improved relatively speaking.

Certainly, if the Fed is less likely to taper QE3 within the next two months, then bond markets across the globe will need to readjust if only slightly: sovereign bond yields shot up in the wake of the Fed’s June policy meeting. But new speculation about the Fed doesn’t stand to just benefit the Japanese Yen; higher yielding currencies that have weakened dramatically in recent weeks could gain too as the promise of more stimulus lingers.

In light of the extreme influence Fed policy has tended to have on the Yen crosses, we suggest that the overall picture for the Yen is “neutral” for the week ahead rather than bullish, as investor positioning remains quite extreme in some cases that could see reversals develop, particularly among the commodity currency bloc.

The Yen, however, does have the potential to be a top performer now that the Fed has sown the seeds for softer US yields. The Bank of Japan policy meeting on Thursday, the first since the Japanese diet elections two weeks ago, is possibly the most important event on the DailyFX Economic Calendar for the coming week.

The Japanese elections were expected to clarify the path towards more stimulus for Prime Minister Shinzo Abe and BoJ Governor Haruhiko Kuroda. Instead, with no supermajority, neither the fiscal nor the monetary authorities have spoken with the conviction of those that felt like whatever policies they wanted to push through, they could with ease. While I originally (and wrongly) suspected that the Yen would weaken after the elections, it has not for two key reasons, one of which will be highly debated this week at the BoJ’s policy meeting.

On the fiscal side, recent chatter has been that the government will no longer pursue its long-discussed sales tax hike. So far, this has been a bullish catalyst for the Yen, and should it become set in stone, it could even more so. If there is no sales tax hike, consumers have more disposable income than they would have had otherwise. Accordingly, in line with recent trends, they would consume more. Therefore, prices would be supported by bolstered aggregate demand, keeping inflation pointed higher. Thus, growth is stronger, inflation is higher, and the BoJ wouldn’t have to act further to weaken the Yen.

On the monetary side, inflation recently hit its highest level since November 2008, above analysts’ and policymakers’ forecasts alike; it has arrived sooner than expected. Likewise, growth too has been stronger than expected. There is little reason to believe that with energy prices approaching their highest level in a year, the BoJ would want to see a much weaker Yen at the expense of destroying its trade balance (Japan has to import nearly all of its energy and therefore is very exposed to higher and volatile energy costs).

With a fairly light calendar otherwise on tap, it is crucial that the BoJ is optimistic on recent economic progress so as to ensure that its policy remains on hold. If so, the Yen’s gains could easily extend as the global growth picture comes into question, which might promote Yen-positive “risk off” sentiment. On the flipside, not all economic data has been rosy, and the BoJ won’t want to say anything that might upset momentum behind inflation. Therefore, we are neutral, but are biased towards a stronger week for the Japanese Yen. –CV

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

DISCLOSURES