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
EUR/USD
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • The US Dollar could gain as it forms bullish technical formations against the Singapore Dollar and Malaysian Ringgit. USD/PHP may have bottomed, will USD/IDR rise next? Find out from @ddubrovskyFX here:https://t.co/3UIKmbLIvD https://t.co/PY2YyH4vkQ
  • The Indian Rupee may be at risk to the US Dollar as USD/INR attempts to refocus to the upside. This is as the Nifty 50, India’s benchmark stock index, could fall further. Get your $USDINR market update from @ddubrovskyFX here:https://t.co/3wsYlSxd26 https://t.co/z2qB9p8IgX
  • A proxy of #EmergingMarket capital flows hit its lowest since July, falling with the #SP500 after some divergence This is as #USD gained against its developing FX counterparts, highlighting potential risk of a spillover outwards Stay tuned for next week's #ASEAN fundy outlook! https://t.co/kAvpnb0EXO
  • 4 consecutive down weeks for the #SP500, last matched over a year ago #Fed balance sheet continues to gain very cautiously, now at its highest since the middle of June. Still, at slower pace than last week Focus shifts to US fiscal stimulus next week in the House of Reps https://t.co/f8zpSILm86
  • #Gold prices have broken lower and while the broader technical structure is constructive, the risk remains for a deeper correction before resumption. Get your $XAUUSD technical analysis from @MBForex here: https://t.co/7p3jPx6nQd https://t.co/nnCSdt6OV5
  • Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.00% 🇳🇿NZD: -0.02% 🇯🇵JPY: -0.15% 🇨🇭CHF: -0.23% 🇦🇺AUD: -0.25% 🇪🇺EUR: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/O8Qb7OHZza
  • Commodities Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.30% Gold: -0.33% Silver: -0.92% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/lEALo4Z1M9
  • The S&P 500 breakdown is testing the first major zone of support and we’re looking for a reaction. Get your S&P500 technical analysis from @MBForex here:https://t.co/JrTNmQ5c7g https://t.co/D79T1134P9
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.29%, while traders in EUR/GBP are at opposite extremes with 65.04%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/lzTHuIgzFQ
  • US Equities Update (Friday Close): $DJI +1.34% $SPX +1.60% $NDX +2.34% $RUT +1.59% $VIX -7.93%
Japanese Yen Outlook: Seasonal Volatility May Fuel JPY Recovery

Japanese Yen Outlook: Seasonal Volatility May Fuel JPY Recovery

2020-08-22 12:00:00
Daniel Moss, Analyst
Share:
USDJPY Price CHart

Japanese Yen Fundamental Forecast, Bank of Japan, Shinzo Abe, US-China – Talking Points:

  • Seasonal volatility suggests that the Japanese Yen may outperform its major counterparts in the coming weeks
  • US-China tensions threaten to sour sentiment and could buoy haven-associated assets
  • Record government debt issuance could force the Bank of Japan’s hand and limit JPY’s potential upside.

JPY Fundamental Forecast: Mixed

The haven-associated Japanese Yen’s sensitivity to volatility may buoy the under-fire currency in the coming weeks, if escalating geopolitical tensions and a stuttering global economic recovery notably sour market sentiment.

The market’s fear-gauge – the Volatility Index or VIX – has steadily drifted lower since peaking on March 18, as central bank’s around the world injected an unprecedented amount of liquidity into the financial system in response to the novel coronavirus pandemic.

This substantial increase in liquidity appears to have suppressed volatility for the time being, directing the VIX lower and in turn dragging the ‘safe haven’ Japanese Yen along for the ride.

However, the seasonal nature of the VIX suggests a resurgence of volatility could be in the offing. The volatility index has climbed 33.76% on average over the last five years in August and is currently down 5.1% heading into the tail-end of the month.

Moreover, a multitude of fundamental headwinds could potentially trigger a flight to safety as the summer lull draws to an end, with an expected increase in volume at the beginning of September potentially exacerbating market volatility and possibly fueling the Japanese Yen.

JPY Index** vs Volatility Index (VIX)

JPY Index vs VIX

JPY Index daily chart created using TradingView

**JPY Index averages CAD/JPY, AUD/JPY, EUR/JPY, GBP/JPY

US-China Tensions Likely to Escalate Ahead of Elections

The surprisingly muted response seen in financial markets in the face of escalating US-China tensions may be indicative of a market dismissing the vitriolic rhetoric as mere posturing ahead of US elections in November.

Nevertheless, President Donald Trump’s recent measures prohibiting US firms from doing business with Chinese-owned WeChat and TikTok could incite a tit-for-tat response from Beijing, potentially resulting in similar measures being imposed on the likes of Apple (AAPL) and Microsoft (MSFT).

Moreover, the future of the phase-one trade deal signed in January looks anything but concrete after President Trump cancelled planned talks last weekend, stating that “I don’t want to talk to China right now” and that the “trade deal means less to me now”.

JPY Forecast
JPY Forecast
Recommended by Daniel Moss
Get Your Free JPY Forecast
Get My Guide

Although a complete breakdown in talks seems relatively unlikely given Beijing’s willingness to reschedule negotiations, further delays and cancellations will probably weigh on investor sentiment.

With that in mind, traders should continue to monitor US-China headlines, as a complete deterioration in trade relations is more than likely to induce a sustained period of risk aversion and drive the Japanese Yen higher against its major counterparts.

Record Bond Issuance May Cap JPY

Counterbalancing the potential bullish drivers of the Japanese Yen is the recent surge in government bond issuance on the back of Prime Minister Shinzo Abe’s $2.2 trillion stimulus plan.

With debt issuance estimated to rise over 60% in 2020, lack of global demand may force the Bank of Japan to increase its purchases of Japanese Government Bonds (JGBs) to continue effectively implementing yield curve control.

Furthermore, consumer price inflation remains drastically lower than the mandated rate of 2% and could encourage the BoJ to expand its current stimulus measures. Core consumer prices in Japan stayed at 0% for the second consecutive month in July.

Therefore, accommodative monetary policy settings may limit the potential upside for the Japanese Yen during periods of volatility. That may potentially prevent a true reversal in the ‘safe haven’ currency’s decline from the highs of March until policymakers actively roll back existing stimulus measures.

Japan Core Inflation Rate

Japan Core Inflation

Source – TradingEconomics

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Daniel Moss
Improve your trading with IG Client Sentiment Data
Get My Guide

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

DISCLOSURES