JPY news - page 30
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USD/JPY: Buy Dips If USD/JPY Loses More Ground On Verbal Intervention
The Trump administration is underway. However, there have been no fresh stories for the yen. USD/JPY traders still hold speculative long positions.
In the coming months, we see the focus on how the US administration delivers its fiscal policy promises, and expect the USD/JPY to trade mainly at the low-110 level. If we eventually reach the stage where the Fed looks to hike rates more than twice a year within the year, we would expect the USD/JPY to move to the high-110 level.
...Even if verbal interventions to cap dollar strength are effective on the first some occasions, we do not think the dollar trend will change as long as the Trump administration talks up policy targeting 4% economic growth and the Fed aims for multiple rate hikes. The USD/JPY could be cyclically further pushed up like in the case of the Reaganomics in the early 1980's.
We see a dip-buying opportunity if the USD/JPY loses ground owing to verbal intervention.
...Also, we think it would be too early for the market to price in implications of the US's protectionism on the USD/JPY.
source
Japan Trade balance (Dec.) Y +641.4bn yen (expected Y 281.1bn)
December trade balance
Japan Services PPI (December) 0.4 % y/y (expected 0.3%, prior 0.3%)
The services PPI is a measure of prices for services products provided by Japanese companies to other firms & government
USD/JPY: Follows A 'Random Pattern'; Keep An Eye On Rinban Operations
The anticipated reflation trade has set in, with shares and DM bond yields breakinghigher, but USD has not participated in this move. Instead, USD has decorrelated from the performance of the US bond market, while the US 10-year bond yield has breached the 10-year 2.52% technical barrier.
The government's monthly sale of US$34 billion in five-year notes drew the weakest demand since July, based on the number of bids received relative to the amount offered, seeing investors switching into equity holdings. Cyclicals such as transportation and financials have led to the upside, suggesting the market making bets on US economic expansion gaining momentum. In this sense the current equity market rally is different to the liquidity-induced, dividend-focused rally seen for most within the post Lehman world. The new structure of this equity market rally makes sense for an economy having closed its output gap now entering into a new area of re-building its capital stock.
Divergence unlikely to continue: Accordingly, the current divergence of USD from US bond yields should not stay for long. It will be the steepening of the US yield curve reducing the relative attractiveness of taking advantage of the wide USD-JPY cross currency base. Otherwise, real yield differentials should be watched closely. It is the 10-year real yield differential and not the front end that matters here. The 10-year real yield differential leads USDJPY while 2-year real yield differentials and USDJPY follow a random pattern.
With DM reflation gaining momentum and the BoJ keeping the JGB curve controlled, the real yield differential should soon point higher again, taking USDJPY with it.
Moreover, the 40-year JGB has reached 1%, which may be too high for the yield curvecontrolling BoJ. Rinban operations emphasising long-end JGB purchases may be the next event to push USDJPY up.
source
Japan December CPI: +0.3% y/y vs +0.2% expected
National CPI y/y for December, % y/y
- expected 0.2%, prior was 0.5%
National CPI y/y excluding Fresh Food, -0.2% y/y- expected -0.3%, prior was -0.4%
National CPI excluding food, energy 0.0% y/y,- expected -0.1%, prior was +0.1%
Tokyo CPI y/y for January, 0.1% y/yTokyo CPI excluding Fresh Food -0.3% y/y,
Tokyo CPI excluding Food, Energy -0.0% y/y,
USD/JPY forecast for the week of January 30, 2017
The USD/JPY pair initially fell during the week, but found enough support yet again to turn around and formed a hammer. It looks as if the 112.50 level continues offer massive support, so I think that longer-term this market is most certainly going to go higher. I believe that buying the USD/JPY pair on the dips should eventually pay off but we have gone a long distance in a short amount of time. Because of this, expect a bit of volatility and perhaps even the market taking a rest before going higher.
Ahead of meeting, the Bank of Japan is nervous about Trump - WSJ
BOJ officials worried about protectionism and FX policy
Bank of Japan officials were initially optimistic that Trump's policies would stimulate the US economy and helped to lift the global (and Japanese) economy.
Now, they're not so sure.
The two day BOJ meeting starts Monday and officials are said to be wary of raising inflation expectations because they are worried Trump could unveil protectionist policies or weaken the US dollar.
"We now realize that we know very little about him," said one of those people cited by the WSJ.
The other worry for the BOJ is that any talk of a higher inflation estimate would boost the yen and be self-defeating.
WSJ:
"Despite the uncertainty over how international trade and the global economy might be affected by the Trump administration, some on the BOJ's nine-member board think an upward revision of the price forecasts is warranted, considering the yen's drop and Japan's economic pickup since Nov. 1, when the previous outlook was released, the people said."
USD/JPY Weekly Forecast January 30-February 3
USD/JPY cleared a hurdle in last week’s trading, breaking out to the upside of the falling trend channel that had contained price action since the beginning of 2017. The pair is now up against the next level of resistance defined by the converging 20 and 50-day moving averages, as well as the corrective top established on January 19 at 115.62. Clearing these levels of resistance would reaffirm the bullish implications of the channel breakout and leave the target at the December/January highs near 118.60. USD/JPY closed out the week at 115.06, a gain of 0.43% over the prior Friday’s close.
USD/JPY started off the week with a decline, as the dollar was subject to selling as investors reacted negatively to Donald Trump’s January 20th inauguration speech, as they had hoped for more details on his plans for tax reform and fiscal spending plans. USD/JPY then bounced back on Tuesday, as the dollar rebounded.
While the pair hesitated on Wednesday, posting modest losses, buyers stepped back in on Thursday lifting the pUSD/JPY above the upper boundary of the falling trend channel. The advance was attributed to a rise in the dollar, which has benefited from the recent risk-on market sentiment amid soaring equity markets. The Dow Jones Industrial Average (DJIA), S&P 500 and NASDAQ Composite Index all advanced to new record highs last week, with the DJIA rising above the 20,000 mark for the first time ever. USD/JPY solidified the channel breakout with additional upside price action on Friday, rising about a half a percent.
On Friday, it was reported that Japanese core inflation declined for the tenth straight month. Japan’s national inflation rate ticked higher in December, although core prices marked the tenth consecutive month of annual declines, suggesting the economy still suffers from weak output and declining living standards. The national consumer price index (CPI) rose 0.3% in the 12 months through December, Tokyo’s statistics bureau announced. That was the third consecutive advance, and followed a 0.5% year-over-year gain in November. Core inflation in Tokyo, a leading measure of nationwide price trends, declined 0.3% annually in January. That followed a 0.6% decline in December that was the biggest in nearly four years. USD/JPY advanced following the release of the inflation data, but halted at the aforementioned resistance levels.
read more
Japan - Retail trade data for December misses estimates
Japan - Retail trade data for December
JPY: Will BoJ Announce A Taper?
Despite JPY strengthening in the new year, our positioning indicator suggests the market’s short JPY position remains at multi-year extremes.
While first-tier data on the labour market and industrial output will attract some attention from the JPY next week, the main local focus will be the BoJ meeting and the Board’s Outlook Report.
Over the past year, the JPY TWI has strengthened in the week of all but one of the BoJ meetings. Admittedly, BoJ meetings have usually occurred the same week as FOMC meetings, and a stubbornly dovish FOMC has contributed to JPY strength during those weeks.
While the FOMC also meets next week, its members have been sounding more hawkish and so could contribute to a breaking of this pattern. But we also see a risk of a more upbeat BoJ in its first Outlook Report for the year. Indeed, the weaker JPY in Q4 will lead to stronger inflation and, to some extent, cyclical data readings in the coming months. And JPY depreciation has already helped push medium-term inflation expectations higher. BoJ Governor Haruhiko Kuroda recently said that Japan’s economy has improved a lot and that it will grow well above expectations.
There is also some risk of the BoJ scrapping its guidance as when it comes to bond purchases. The central bank may have stepped up purchases in bonds due in 5–10 years, but the increase is not fully offsetting the reduction in shorter-term purchases. Our economists note that the net increment in JGB holding in 2017 will be way below the present guidance of JPY80trn.
As such, a formal taper announcement cannot be excluded. Any announcement of a formal taper would likely contain some sticker shock and strengthen the JPY, as it would lose some of its appeal as a funding currency.
We still significant risk of further downside in JPY crosses.