USD/JPY approached last week’s high of 80.38. The positive prospects of the pair will be confirmed if it breaks the major resistance of 80.60/65 (3 tops made in May-June; 50% retracement of its decline from March to September). Commerzbank claims that if these levels are reached, we’ll see some profit taking and points at support of 79.25/10.
USD/JPY" title="USD/JPY" width="911" height="662">
The past week has brought some changes to how investors perceive the future of USD/JPY. We already had some bullish technical signals (remember, the breach above the daily Cloud & 200-day MA?). Now this technical evidence is strengthened by the fundamental factors: the market is getting more and more certain that the Bank of Japan will increase monetary stimulus until inflation rises to 1%. According to the BOJ October 4-5 meeting minutes released Friday, Japan’s economy, may have entered a “recessionary phase.”
Earlier this year the greenback had already made a considerable advance in January-March. That time, USD/JPY gained on BOJ easing, Japan’s current account deficit and rising yields in the US.
This time, though, the situation is a bit different. The yen’s prospects are negative: the policy of Japanese monetary authorities will weaken yen. Moreover, Japanese exporters have shown poor results, so the volumes of their USD selling won’t be very high. The risks come from the US with its QE3, elections and fiscal cliff. For USD/JPY QE3 will be the most important. If US economy don’t keep recovering and adding enough of new jobs, the Fed will have print more money debasing dollar.
The near-term focus is on US labor market data release (12:30 GMT). Analysts at BNP Paribas recommend focusing not on the NFP, but on the unemployment rate: a reading of 8% or higher will hurt USD/JPY.
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USD/JPY: Unraveling A Complicated Story
ByFBS
Published 11/04/2012, 04:14 AM
Updated 04/10/2024, 06:10 AM
USD/JPY: Unraveling A Complicated Story
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