By FXEmpire.com
Introduction: 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.
- 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
Weekly Analysis and Recommendation:
The USD/JPY ended the week trading above the 80 price level, the strength of the yen was extremely high this week, as investors moved from the USD to gold as safe haven bet, after the Fed announcement which dashed the hopes of additional QE, markets returned to normal, with risk aversion shifting back to the USD. The DX climbed well above 82.00 again. The yen entered the weekend trading at 80.44
Asian markets should generally follow the global tone with two possible exceptions. One is the risk of nearer-term action by China’s central bank. Liquidity conditions have tightened meaningfully in China over the past month, with the CHIBOR rates quoted on Bloomberg indicating that markets are starved for cash and expecting the PBOC to do something about it over the next month or two. The 200bps move in overnight CHIBOR (China’s LIBOR) since May (see left side of chart) could well prompt the PBOC to act either via liquidity operations in markets or even possibly outright policy moves, although we think that a reserve ratio cut in July — after the PBOC can gauge how funding conditions look after quarter end — is the most likely path. Second is that Japan issues its major monthly economic releases. Japanese industrial production is expected to post the sharpest month-over-month decline in over a year while the highest frequency inflation gauges for Tokyo are expected to post ongoing deflation in both headline and core prices excluding food and energy. Retail sales, total household spending, housing starts, and the jobless rate will round out the broad picture for the Japanese economy.
One of the highlights of Japan’s busy data calendar next week (including CPI, retail sales, household spending, unemployment and housing starts) will be the preliminary estimate for industrial production in May, due out on Friday. We anticipate a contraction of 3.2% on a monthly basis to follow April’s 0.2% loss (downwardly revised from +0.2% m/m). It is expected that a high base effect in the auto sector in April, as well as chemical plant shutdowns for inspections in May will drag the headline industrial output figure down. External factors also continue to weigh on Japan’s fragile recovery, including in particular the euro crisis (Japan posted its first-ever trade deficit with the European Union in May), and the resulting risk aversion in global financial markets, which keeps upward pressure on the yen to the detriment of Japanese exporters. Though industrial production will likely rebound to some extent in the months ahead on the back of ongoing reconstruction spending, the fundamental situation in Japan remains quite weak, and volatility in real economic data will continue to reflect this fact. After a strong first quarter in which the economy expanded 4.1% y/y, we expect the pace of growth to moderate, resulting in an average rate of 2% in 2012.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.
Major Economic Events for the week of June 19-23, 2012 actual v. forecast
|
Date |
Time |
Currency |
Importance |
Event |
Actual |
Forecast |
Previous |
|
Jun. 19 |
02:30 |
AUD |
Monetary Policy Meeting Minutes |
||||
|
10:00 |
EUR |
German ZEW Economic Sentiment |
-16.9 |
4.0 |
10.8 |
||
|
Jun. 20 |
09:30 |
GBP |
Claimant Count Change |
8.1K |
-3.0K |
-12.8K |
|
|
17:30 |
USD |
Interest Rate Decision |
0.25% |
0.25% |
0.25% |
||
|
19:15 |
USD |
Fed Chairman Bernanke Speaks |
|||||
|
23:45 |
NZD |
GDP (QoQ) |
1.1% |
0.5% |
0.4% |
||
|
Jun. 21 |
09:30 |
GBP |
Retail Sales (MoM) |
1.4% |
1.2% |
-2.4% |
|
|
13:30 |
Core Retail Sales (MoM) |
-0.3% |
0.2% |
0.3% |
|||
|
13:30 |
USD |
Initial Jobless Claims |
387K |
380K |
389K |
||
|
15:00 |
USD |
Existing Home Sales |
4.55M |
4.57M |
4.62M |
||
|
Jun. 22 |
09:00 |
EUR |
German Ifo Business Climate Index |
105.3 |
105.9 |
106.9 |
|
|
13:30 |
CAD |
Core CPI (MoM) |
0.2% |
0.3% |
0.4% |
Historical:
Highest: 108.00 on Sep 19, 2008
Average: 87.08 over this period
Lowest: 75.58 on Oct 31, 2011
Economic Highlights of the coming week that affect the AUD, JPY, NZD and USD
|
Date |
Time |
Currency |
Event |
Previous |
|
Jun 25 |
14:00 |
USD |
New Home Sales |
343K |
|
Jun 26 |
13:00 |
USD |
S&P/CS Composite-20 HPI y/y |
-2.6% |
|
14:00 |
USD |
CB Consumer Confidence |
64.9 |
|
|
22:45 |
NZD |
Trade Balance |
355M |
|
|
Jun 27 Jun 28 |
12:30 |
USD |
Durable Goods Orders m/m |
0.2% |
|
14:00 |
USD |
Pending Home Sales m/m |
-5.5% |
|
|
14:30 |
USD |
Crude Oil Inventories |
||
|
23:50 |
JPY |
Retail Sales y/y |
5.8% |
|
|
1:00 |
NZD |
NBNZ Business Confidence |
27.1 |
|
|
Jun 29 |
12:30 |
USD |
Unemployment Claims |
|
|
12:30 |
USD |
Final GDP q/q |
1.9% |
|
|
22:45 |
NZD |
Building Consents m/m |
-7.2% |
|
|
23:30 |
JPY |
Household Spending y/y |
2.6% |
|
|
23:30 |
JPY |
Tokyo Core CPI y/y |
-0.8% |
|
|
23:50 |
JPY |
Prelim Industrial Production m/m |
-0.2% |
|
|
1:30 |
AUD |
Private Sector Credit m/m |
0.4% |
|
|
12:30 |
USD |
Core PCE Price Index m/m |
0.1% |
|
|
12:30 |
USD |
Personal Spending m/m |
0.3% |
|
|
13:45 |
USD |
Chicago PMI |
52.7 |
|
|
13:55 |
USD |
Revised UoM Consumer Sentiment |
74.1 |
Upcoming Government Bond Auctions
Date Time Country
Jun 25 09:10 Norway
Jun 25 09:30 Germany
Jun 25 10:00 Belgium
Jun 25 15:30 Italy
Jun 26 00:30 Japan
Jun 26 08:30 Holland
Jun 26 08:30 Spain
Jun 26 09:10 Italy
Jun 26 09:30 UK
Jun 26 14:30 UK
Jun 26 17:00 US
Jun 27 09:10 Italy
Jun 27 09:10 Sweden
Jun 27 17:00 US
Jun 28 09:10 Italy
Jun28 17:00 US
Click here for further USD/JPY Forecast.
Originally posted here
