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Fundamental Japanese Yen Forecast: Neutral

  • With rising global risks comes a rising bid for the Japanese Yen
  • This isn’t going away anytime soon given the complex nature of those risks
  • But they might just back off a bit in the coming sessions

Find out what retail foreign exchange traders make of the Japanese Yen’s prospects right now, in real time, at the DailyFX Sentiment Page

The Japanese Yen and the US Dollar find themselves still very much locked in a ‘battle of the havens’ as global uncertainties economic uncertainties multiply.

It’s sobering to consider that many in the markets quite seriously hoped to see a trade deal between the US and China by the time May ended. While that always seemed like a stretch, the actual collapse in trade relations between the two global titans has been quite shocking and continues to loom over all else.

‘All else’ includes plenty of other likely snags too, from the endless drama of Brexit to the clear fragmentation of European politics. China’s economy is in an unwelcome spotlight too, with its manufacturing sector revealed to have contracted once more in May after just two months of recovery.

No wonder then that assets perceived to offer safety in times of high risk should be sought and the Japanese Yen has been winning that haven fight.

USD/JPY has retreated quite sharply from the recent peaks scaled in late April. From the standpoint of technical analysis Yen bulls do look a little exhausted as a new trading week gets under way. With that in mind it may take some real bad news to bolster the general flight to safety and move USD/JPY meaningfully lower in the short term, even if more falls look all-too-likely further out.

There are a few possible triggers coming up in a week rich with important economic events. Australia’s central bank will give its monetary policy decision on Tuesday and is widely expected to instigate the first reduction in record-low interest rates since late 2016. Should it do so, riskier assets than the Yen might get an initial fillip at its expense, but this seems unlikely to last in the general atmosphere of uncertainty. The European Central Bank will also give a policy statement and, while it is not expected to act, it is hard to see how that organization can sound anything other then extremely cautious about the Eurozone’s prospects.

The week will end with official US employment numbers. This crucial series remains among the global economy’s few clear bright spots. Any outcome close to the 195,000 new non-farm jobs expected for May will probably see a measure of reassurance creep back in to trading.

All in all, this may be a week in which Japanese Yen struggles for further gains, but that prognosis assumes as-expected data outcomes and no nasty surprises out of left field. The latter is obviously a brave assumption in this market. Still, it’s a neutral call this week. Just.

USDJPY

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

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