By FX Empire.com
USD/JPY Weekly Fundamental Analysis February 6-10, 2012, Forecast
Economic Events: (GMT)
|
Feb. 06 |
||
|
NZD |
||
|
Feb. 07 |
AUD |
|
|
AUD |
||
|
Feb. 08 |
USD |
|
|
Feb. 09 |
GBP |
|
|
EUR |
||
|
USD |
||
|
EUR |
||
|
Feb. 10 |
CNY |
|
|
CAD |
||
|
USD |
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 ended the week at 76.61opening at 76.22
The markets went on a rollercoaster ride on Friday after the U.S. Labor Department reported that 243,000 jobs were added in January and the unemployment rate dipped to 8.3%.
The markets all week have been reacting only to news and economic reports. US jobs data and unemployment figures surprised the market this week, adding 243k jobs and unemployment dropping to 8.3%. Overall this was a strong week for the US and the greenback.
After reacting to the news and pushing the dollar up against all major currencies, the markets realized that this would reduce the need for Fed intervention, diminishing the chances of more QE or changes in monetary policy. Compounding this with more craziness is Greece, the USD gave back some of its gains.
Greece is still not resolved and the special meeting of the EU that was scheduled for Monday to review the Greek proposal has been cancelled.
There are several problems, which include Germany wanting to have more control over the Greek budget in the future, since it will be mostly German taxpayers who will be funding the bailout. Also the Greek politicians are not supportive of the addition austerity measures, facing elections in April; many political leaders are more concerned with re-election that demands from the EU and IMF.
The Greek Prime Minister said in a statement on Saturday, that the deal will be concluded by the end of the Sunday, satisfying politicians, creditors and the EU, ECB and IMF. The markets will await this new agreement.
The U.S. dollar was boosted on Friday, after stronger-than-forecast U.S. employment data dampened expectations that the Federal Reserve will implement fresh monetary easing measures to stimulate growth.
Also on Friday report showing a greater-than-expected expansion in the U.S. service sector in January also boosted the greenback.
On Thursday Fed Chairman Ben Bernanke said the economy has shown “signs of improvement” but warned that the outlook remained “uncertain”.
The dollar continued to strengthen against the yen
Watch carefully for BoJ intervention.
Strength:
1) US- Jan Payroll gains show big upside surprise of 243k, about 100k more than expected, unemployment rate falls to 8.3%
2) US- ISM services index rises to best since Feb ’11
3) US-ISM manufacturing up 1 pt but touch less than expected
4) US -Jan vehicle sales at 14.1mm is best since clunker month in Aug ’09 and the most since May ’08 before that
5) US – savings rate rises to 4% from 3.5%
6) US -Initial Jobless Claims fall 12k
7) Germany -unemployed fall again, rate at 6.7%
UK- manufacturing and services PMI figures both rise
9) Eurozone- manufacturing and services PMI in line with initial
10) Portuguese bond yields fall from highs, Italian yields lower too with Spain flat
11)China – manufacturing PMI stays above 50, Taiwan and South Korea rise but remain below 50
12) India – manufacturing and services PMI both jump
Weakness:
1) US- Jan Consumer Confidence falls almost 4 pts to 61.1, well below expectations of 68 as labor market answers soften and those that plan to buy a home falls to lowest since Aug and those that plan to buy a car down at lowest since Oct ’10
2) US -CS home price index falls to lowest since Feb ’03
3) US -MBA said refi’s fell 3.6% and purchase apps were down 1.7%
4) Canada – Jan jobs report disappoints
5) China – PMI services index falls to 52.9 from 56, the 2nd lowest since Feb ’11
6) Taiwan -economy in a recession after Q4 contraction q/o/q
7) Greek- debt discussions for another week are hours away from wrapping up, becoming a nightmare
Eurozone -Amount of LTRO funds from ECB continue to be redeposited with the ECB
Upcoming Sovereign Bond Sales Dates
Feb 07 09:00 Netherlands Eur 5.0bn Jul 2022 DSL
Feb 07 10:10 Greece 6M T-bill auction
Feb 07 10.30 UK Auctions 1.75% 2017 conventional Gilt
Feb 07 15:30 UK Details gilt auction on Feb 16
Feb 07 18:00 US Auctions 3Y Notes
Feb 08 10:10 Sweden Nominal bond auction
Feb 08 10:30 Germany Eur 4.0bn Feb 2017 Bobl
Feb 08 10:30 Swiss Bond auction
Feb 08 16:30 Italy Details BOT auction on Feb 13
Feb 08 18:00 US Auctions 10Y Notes
Feb 09 10:10 Sweden Sek 0.75bn I/L bond auction
Feb 09 15:30 Sweden Details I/L bond auction on Mar 23
Feb 09 16:00 US Announces auctions of 30Y TIPS on Feb 16
Feb 09 16:30 Italy Details BTP/CCTeu auction on Feb 14
Feb 09 18:00 Italy Auctions 30Y Bonds
Feb 10 11:00 Belgium OLO auction
Originally posted here
