USD/JPY Weekly Fundamental Analysis February 20-24, 2012, Forecast

By FX Empire.com

Economic Events: (GMT)

Major Economic Reports due this week. Please refer to the daily reports for explaination and forecast

US Markets closed on Monday for Presidents Day Holiday

Feb. 21	00:30	AUD	Monetary Policy Meeting Minutes
13:30	CAD	Core Retail Sales (MoM)
Feb. 22	09:30	GBP	MPC Meeting Minutes
15:00	USD	Existing Home Sales
Feb. 23	09:00	EUR	German Ifo Business Climate Index
13:30	USD	Initial Jobless Claims
Feb. 24	07:00	EUR	German GDP (QoQ)
09:30	GBP	GDP (QoQ)
15:00	USD	New Home Sales

Rule:

The USD/JPY foreign currency exchange rate is the price of one U.S. dollar – the base currency – in terms of Japanese yen – the quote currency. For example, a bid/ask quote of 89.29/89.32 means that one U.S. dollar can be bought for 89.32 yen and one U.S. dollar can be sold at 89.29 yen.

If the U.S. dollar is expected to appreciate against the yen, then the above quote might rise to say, 89.73/89.76. The forex strategy in this case would be to buy USD/JPY. If, on the other hand, the U.S. dollar is expected to depreciate against the yen, then the above quote might fall to say, 88.68/88.71. The forex strategy in this case would be to sell USD/JPY.

In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.

Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment.

Daily range average : 80-90 pips
Best time to trade: Asian Session (2400 GMT – 0900 GMT)
Some factors affecting the USD/JPY rate:

• The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
• Japanese government intervention to maintain their currency sends USD/JPY lower

Analysis and Recommendation:

The USD/JPY climbed at the end of the week on positive US news causing the safe-haven yen to take significant losses. The better than expected US Unemployment Claims and Philly Fed Manufacturing Index led to investor risk taking throughout the evening session. The USD/JPY hit a 3 1/2 month high before hitting significant resistance close to the 79.00 level.

The Yen is trading at of this writing at 79.56. There are no significant economic reports due in Japan this week and the US markets are closed on Monday for the Presidents Day Holiday

Strength

• Greek bailout and PSI deal looking more likely AGAIN, at least that’s what markets think as Greek stocks rally 3.4% on week, European credit CDS narrower, European banks bounce and US stocks continue their march. Merkel and Monti assure the markets.
• German ZEW investor confidence figure rises to best since April
• Initial Jobless Claims fall to lowest since 2008 at 348k, well below estimates of 365k
• Philly and NY manufacturers surveys up but components mixed as headline #’s are not sum of parts
• Housing starts continue to grow for multi-units (apt/condo)
• NAHB home builder index up 4 pts, 3 pts better than expected and highest since May ’07
• India’s wholesale inflation rises at slowest pace since Nov ’09, leaves open room to cut rates
• Australia central bank surprises with a hold on interest rates
• UK announces new round of QE
• Australia and NZ have positive economic reports
• China reduces bank reserves
• ECB deposit facility falls
• Japanese exporters see some breathing room with weaker yen to lowest since July after BoJ embarks on even more QE

Weakness

• Greek saga never ending, ECB wants special treatment old bond new bond swap
• Euro zone GDP in Q4 contracts .3% q/o/q, although touch better than estimates of .4%
• Portugal’s unemployment rate rises to 14% in Q4 from 12.4%, the highest since at least ’98
• Singapore confirms Jan estimate of Q4 GDP contraction
• Japanese economy shrinks more than expected in Q4, BoJ can’t help itself with more QE
• Chinese FDI in Jan falls .3%, 3rd month in a row of declines
• US Jan Retail Sales ex auto’s weaker than expected (but Dec revised up)
• CPI rate of change a below estimate m/o/m, core rate rises to highest since Sept ’08 y/o/y. Overall index at another record high.

Economic Highlights Feb 13-17 actual v. forecast

Feb. 14	JPY	Interest Rate Decision	0.10%	0.10%	0.10%
JPY	BoJ Press Conference
EUR	German ZEW Economic Sentiment	5.4	-11.6	-21.6
GBP	BOE Inflation Letter
USD	Core Retail Sales (MoM)	0.7%	0.6%	-0.5%
USD	Retail Sales (MoM)	0.4%	0.8%	0.0%
Feb. 15	EUR	German GDP (QoQ)	-0.2%	-0.3%	0.6%
GBP	Claimant Count Change	6.9K	3.2K	1.9K
GBP	BoE Inflation Report
GBP	BoE Gov King Speaks
USD	FOMC Meeting Minutes
Feb. 16	USD	Initial Jobless Claims	348K	364K	361K
USD	Fed Chairman Bernanke Speaks
Feb. 17	GBP	Retail Sales (MoM)	0.9%	-0.2%	0.6%
CAD	Core CPI (MoM)	0.2%	0.1%	-0.5%
USD	Core CPI (MoM)	0.2%	0.3%	0.1%
USD	CPI (MoM)	0.2%	0.3%	0.0%

Sovereign Bond Auction Schedule

Feb 20-24 n/a UK 0.375% 2062 I/L Gilt syndication

Feb 20 10:10 Norway Nok 3bn 4.5% May 2019 DSL

Feb 20 10:10 Slovakia Eur 0.15bn Apr 2014 & Eur 0.05bn Nov 2016 bonds

Feb 21 09:30 Spain 3 & 6M T-bill auction

Feb 21 15:30 UK Details gilt auction on Mar 01

Feb 21 18:00 US Auctions 2Y Notes

Feb 22 10:10 Sweden Nominal bond auction

Feb 22 10:30 Germany Eur 5.0bn Mar 2014 Schatz

Feb 22 16:30 Italy Details CTZ/BTPei on Feb 24 & BOT on Feb 27

Feb 22 18:00 US Auctions 5Y Notes

Feb 23 10:10 Sweden Sek 0.75bn I/L bond auction

Feb 23 16:30 Italy Details BTP/CCTeu on Feb 28

Feb 23 18:00 US Auctions 7Y Notes

Feb 24 10:10 Italy Auctions CTZ/BTP

Originally posted here