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  • $SPX holding support, 40m to go until the statement support, prior res $ES $SPY
  • ...I don't believe the markets will ever be okay with the Fed bowing out of stimulus. As market sentiment normalizes, speculative exposure increases proportionally, meaning there will always be a market premium to contend with. A form of the sociological 'normalization' effect
  • Equities pull back from session highs as traders eye the FOMC meeting at the top of the hour $ES $SPX $SPY
  • ...that is my take on the panic around tapering. I'm not advocating for expediting rate hikes, but to continuously punt easing back on stimulus by even a marginal amount only compounds the market's dependencies - increasing moral hazard.
  • 'The economy and markets are so strong that we can't reduce the $120 billion per month asset purchases. Further, if only we can continue this path for an indefinite future, the market will absorb the external risk on its own.'
  • Also, here is the schedule of FOMC meetings from now through the end of 2022. If the Fed doesn't signal taper today, next scheduled time is Nov 2nd and 'quarterly' event time is Dec 14th. Will taper be easier w/ one or two more high CPI updates?
  • Here is my FOMC scenario table going into the rate decision. While a delay in the taper call seems feasible with the market wobble, there will always be wobbles before and the existential threat of a mkt tantrum. Always a hostage?
  • Gold prices are pushing higher so far this week and the FOMC is waiting in the wings with their September rate decision. Get your market update from @JStanleyFX here:
  • RT @CEOAdam: SO FASCINATING! Dogecoin Poll was by far my highest ever read tweet. In 24 hours, 4.2 million views, my most ever retweets, mo…
  • Just checked the Fed's website to see if they accidently release the SEP (Summary of Economic Projections) early by accident - happened once before. Nope, not live yet; but this will be the link when it is:
Japanese Yen Poised to Gain this week if Big Event Disappoints

Japanese Yen Poised to Gain this week if Big Event Disappoints

David Rodriguez, Head of Product
Japanese Yen Poised to Gain this week if Big Event DisappointsJapanese Yen Poised to Gain this week if Big Event Disappoints

Fundamental Forecast for Yen:Bullish

A great week for the US S&P 500, Japanese Nikkei 225, and other global financial bellwethers pushed the inversely-correlated Japanese Yen lower against almost all G10 counterparts. Continued equity market gains would likely force similar JPY losses through the foreseeable future. Yet key fundamental factors suggest that the JPY uptrend may re-assert itself in short order.

The Japanese currency remains the best-performing currency of the G10 on a year-to-date basis amid financial market turmoil, and it would take more than several weeks of stock market recovery to change underlying risk factors. The popular narrative remains straightforward—a slowdown in global economic growth is a major risk to corporate profits, equities, commodities, and fixed income markets.

Japan in particular is exposed to fast-slowing growth in China; the Japanese Nikkei 225 and the Chinese CSI 300 are two of the worst-performing global indices in 2016. Ordinarily a volatile domestic market makes the local currency less attractive, and indeed the Chinese Yuan has fallen hard as investors pull their money out of China’s volatile shares. Yet the Yen acts as a proxy of the opposite kind as the JPY strengthens amid Chinese and Japanese financial market volatility. We look to events in China and other key financial markets to continue driving Japanese markets and the Yen through the foreseeable future.

China’s stock market continues to recover as a reserve ratio cut from China’s central bank eases tensions, and even a sovereign credit rating downgrade could not stop the CSI 300 from rising another four percent. We expect the Yen to continue to weaken if this recovery continues. Yet all eyes turn to a series of key global central bank meetings ahead—surprises could change financial market conditions in a hurry.

A highly-anticipated European Central Bank meeting promises big volatility well-beyond European borders in the days ahead. At stake is whether the ECB has the resolve and the means to ‘fix’ Europe. Most expect President Mario Draghi and fellow board members will cut interest rates further into negative territory in an effort to do just that. Yet it’s easy to see how the weight of expectations would force big market volatility on any disappointments, and the Yen in particular stands to gain if markets falter.

The Bank of Japan will look at market developments with great interest at its March 15 meeting, and much would need to change between now and then to make fresh BoJ policy action likely. It is nonetheless clear that much could change between now and then. Whether or not the Yen resumes its uptrend may very well depend on market reactions to the ECB and other key events in the week ahead.

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