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 at 79.68 remaining powerful as markets continue to seek safe havens. The BoJ ignored political pressure and international calls for action and maintained rates and current monetary policy, but warned speculators away from the markets threatening intervention.
Asian markets will have little capacity to influence the global tone with the possible exception of China’s state version of the purchasing managers’ index that is due out on Thursday night. Consensus is expecting a modest drop to a still expansionary reading that lies at odds with the private sector PMI which remains in contraction, and with hard data on industrial production that has slowed markedly into the New Year. Indian Q1 GDP is expected to come in at 6% y/y which would remain among the weakest growth rates of the past decade. Japanese household spending, retail trade, industrial production and housing starts are also on next week’s schedule. RBA Governor Glenn Stevens’s delivers a speech into the Monday market open ahead of the June 5th RBA rate decision that consensus expects will yield no change in the cash target rate of 3.75%. The RBA has cut by 100bps since October in two moves.
Sustained evidence of a slowdown in trade, industrial production and retail sales in China will lead to a downward revision in our GDP growth projection for the next 18 months. The purchasing managers’ index to be released in early June will show a weakened manufacturing sector (reading below 50) marking a seventh consecutive monthly decline. China expanded at an 8.1% y/y rate in the first quarter of the year. The government authorities are gearing decisively towards a pro-growth policy mix in the context of relatively well contained price pressures; indeed, consumer price inflation declined to 3.37% y/y in April 2012, down from 6.5% y/y in July 2011. We do anticipate coordinated monetary and fiscal stimuli to be put in place in the coming months. The Chinese central bank will lower reserve requirements to stimulate manageable credit-intensive economic activity during the process of rebalancing from investment to consumption. In the fiscal arena, tax cuts and a boost to basic infrastructure investment projects will become primary growth drivers. Additionally, further credit flows will be allocated to major projects under way.
Major Economic Events for the week of May 21-25 actual v. forecast for Yen, the Aussie and the Kiwi
|
Currency |
Actual |
Forecast |
Previous |
|
|
NZD |
Inflation Expectations q/q |
2.4% |
2.5% |
|
|
JPY |
Trade Balance |
-0.48T |
-0.60T |
-0.62T |
|
AUD |
CB Leading Index m/m |
0.2% |
0.0% |
|
|
AUD |
MI Leading Index m/m |
0.4% |
0.0% |
|
|
JPY |
Overnight Call Rate |
|
|
|
|
NZD |
Trade Balance |
355M |
445M |
186M |
|
JPY |
Tokyo Core CPI |
-0.8% |
-0.6% |
-0.5% |
Economic Highlights of the coming week that affect the AUD, JPY, NZD and USD
|
Date |
Currency |
Previous |
||
|
May 28 |
23:30 |
JPY |
3.4% |
|
|
23:50 |
JPY |
10.3% |
||
|
May 29 |
TBD |
AUD |
-9.4% |
|
|
13:00 |
USD |
-3.5% |
||
|
14:00 |
USD |
69.2 |
||
|
22:45 |
NZD |
19.8% |
||
|
May 30 |
1:30 |
AUD |
0.9% |
|
|
1:30 |
AUD |
-4.6% |
||
|
14:00 |
USD |
4.1% |
||
|
23:50 |
JPY |
1.3% |
||
|
May 31 |
1:00 |
NZD |
35.8 |
|
|
1:30 |
AUD |
7.4% |
||
|
1:30 |
AUD |
-0.3% |
||
|
1:30 |
AUD |
0.4% |
||
|
1:30 |
JPY |
1.3% |
||
|
12:15 |
USD |
119K |
||
|
12:30 |
USD |
2.2% |
||
|
12:30 |
USD |
370K |
||
|
13:45 |
USD |
56.2 |
||
|
15:00 |
USD |
0.9M |
||
|
23:50 |
JPY |
7.6% |
||
|
Jun 1 |
12:30 |
USD |
115K |
|
|
12:30 |
USD |
8.1% |
||
|
12:30 |
USD |
0.2% |
||
|
12:30 |
USD |
0.3% |
||
|
14:00 |
USD |
54.8 |
Upcoming Government Bond Auctions
Date Time Country
May 28- n/a UK
May 28 09:10 Italy
May 29 00:30 Japan
May 29 09:10 Italy
May 29 09:10 Norway
May 30 09:10 Italy
May 30 09:10 Sweden
Click here for updated USD/JPY News.
Originally posted here
