USD/JPY Weekly Fundamental Analysis March 16-24, 2012, Forecast
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
Analysis and Recommendation:
The USD/JPY is up trading at 83.44 making huge gains against the USD most of the week. The pair traded in a range extending from 81.972 to 84.178. Moving up on Friday as investors began to move from the USD after a pair of reports on Friday and week of positive data, gave investors confidence to move to more risk assets, coupled by inflationary fears that would stop the Fed from continuing easing monetary policy.
“Overseas economies still have not emerged from a deceleration phase on the whole but some improvement has recently been observed in the U.S. economy and the sluggish European economy has stopped deteriorating,” the central bank said. The BoJ kept key rates and also announced it would increase the amount of loans available through its growth supporting facility by 2 trillion yen ($24.35 billion)
The beginning of last week brought a lot of negative economic data from China, the worse was a reduction in 2011 GDP.
The JPY was trading at historical lows, until its recent moves upwards. We can expect to see a small drop in early week trading coming back to the 82.50range.
Major Economic Events for the week of March 19-24
|
Mar. 20 |
01:30 |
AUD |
Monetary Policy Meeting Minutes |
|
Mar. 21 |
10:30 |
GBP |
MPC Meeting Minutes |
|
15:00 |
USD |
Existing Home Sales |
|
|
22:45 |
NZD |
GDP (QoQ) |
|
|
Mar. 22 |
10:30 |
GBP |
Retail Sales (MoM) |
|
13:30 |
Core Retail Sales (MoM) |
||
|
13:30 |
USD |
Initial Jobless Claims |
|
|
17:00 |
EUR |
ECB President Draghi Speaks |
|
|
Mar. 23 |
12:00 |
CAD |
Core CPI (MoM) |
|
15:00 |
USD |
New Home Sales |
The weeks highlights
In Australia, data on skilled vacancies and merchandise imports is set for release.
The Bank of England will also release the minutes of its last meeting, while data on housing starts and building approvals is due in the United States.
The European Union will release draft proposals regarding the regulation of shadow banks.
The International Monetary Fund will host high level talks at the two day China-India conference in New Delhi.
RBA Governor Glenn Stevens will speak at an investment conference in the week ahead.
Monday
The National Association of Home Builders housing market index for March will be released in the United States on Monday.
Tuesday
The RBA will release the minutes of its March policy meeting, where it kept the official cash rate on hold for the second consecutive time. Investors will watch carefully for any reflection on the expected direction that rates will take over the rest of the year. Most economists are still expecting at least one more rate cut in 2012.
US February housing starts figures and building approval data released. Economists are forecasting housing starts to be flat for the month, at around 700,000.
In the United Kingdom, February consumer price index data is awaited, alongside retail price index figures for the month.
Wednesday
The international merchandise figures for February reported by the Australian Bureau of Statistics. Also the Department of Education and Workplace Relations will release its skilled vacancies index for February.
February existing home sales figures in the US, along with the weekly Energy Information Administration petroleum status report. Analysts expect the data to show a rise in home sales of about two per cent.
Thursday
Mortgage Bankers Association mortgage applications figures are also due.
Elsewhere, the Bank of England will release the minutes of its last policy meeting.
UK public sector net borrowing for February is also due.
Also due is the highly anticipated jobless claims data is out in the US. February retail sales data is expected in the UK.
Friday
US new home sales figures for February and experts expect sales to have risen by 6,000 to 327,000.
Economic Releases for the week of March 12-16
|
Mar. 13 |
JPY |
Interest Rate Decision |
0.10% |
0.10% |
0.10% |
|
EUR |
German ZEW Economic Sentiment |
22.3 |
10.5 |
5.4 |
|
|
USD |
Core Retail Sales (MoM) |
0.9% |
0.8% |
1.1% |
|
|
USD |
Retail Sales (MoM) |
1.1% |
1.1% |
0.6% |
|
|
USD |
Interest Rate Decision |
0.25% |
0.25% |
0.25% |
|
|
Mar. 14 |
GBP |
Claimant Count Change |
7.2K |
6.0K |
7.0K |
|
Mar. 15 |
CHF |
Interest Rate Decision |
0.00% |
0.00% |
0.00% |
|
USD |
Initial Jobless Claims |
351K |
356K |
365K |
|
|
Mar. 16 |
USD |
Core CPI (MoM) |
0.1% |
0.2% |
0.2% |
|
USD |
CPI (MoM) |
0.4% |
0.4% |
0.2% |
Government Bond Auctions (this week)
Mar 19 n/a Greece CDS Auction
Mar 19 10:10 Slovakia Bond auction
Mar 19 10:10 Norway T-bill auction
Mar 20 09:30 Spain 12 & 18M T-bill auction
Mar 21 10:10 Sweden Nominal bond auction
Mar 21 10:30 Germany Eur 5.0bn Mar 2014 Schatz
Mar 21 10:30 Portugal Eur 0.75-1.0bn 4 & 6M T-bills
Mar 22 10:10 Sweden I/L bond auction
Mar 22 10.30 UK Auctions 0.625% 2042 I/L Gilt
Mar 22 15:00 US
Announces auctions of 2Y Notes on Mar 27, 5Y Notes on Mar
28 & 7Y Notes on Mar 29
Originally posted here
