BankForecast.com USD/JPY Weekly Forecast April 11-15 2016

Home / USD JPY / BankForecast.com USD/JPY Weekly Forecast April 11-15 2016 FORECAST

We have seen another very volatile week on financial markets, again with FED in spotlight. Minutes of  March FOMC meeting had been released, revealing that there is still not clear path for FEDs policy and that it is currently largely driven by world economical developments and fears of spillover effects on US economy and exports, rather than actual developments in the US. Minutes also revealed that rate increase will be again discussed on next FOMC meeting, which will be held on April 26-27, however, such move will be heavily depended on world economic scene ( Bloomberg ).Dovish tone of FED officials pushed US Dollar to new lowest level since October 2014 against Japanese Yen, finishing week at level of 108. Such move has not been driven by actual fundamentals, but simply the fact that markets don’t like uncertainty and are still finding safe haven in Japanese Yen.

FED Chair Yellen was speaking  at panel discussion in New York as of 7th April, accompanied by Ben Bernanke, Alan Greenspan and Paul Volcker. Ensuring maximum employment is one of the FEDs major targets which is almost accomplished through FEDs measures, as per Chair Yellen. She stressed that further drop in unemployment might be expected during future period. Although, current inflation goal is set at 2% by FED, as per Yellen, the same level is not an inflation cap at the same time ( Bloomberg ). After FOMC Minutes and Chair Yellen speech many market analysts revised their expectations on future rate increase to eventually only one, from officially planned two rate increases for this year.

BOJ officials do not seem very concerned with current Yen strengthening, making markets convinced that BOJ will not make direct market intervention to halt further Yen rally. However, as of early Friday, there has been call made by Japan Finance Minister Aso on reaction considering that such strong move of Yen is currently not desirable ( CNBC ). Struggling with slowdown of economy and current BOJ monetary measures that are not outputting expected results,  increase in Yen value might further hurt Japan exports and industrial production. Governor Kuroda noted again readiness of Japan central bank to make further easing of monetary policy  in order to drive inflation to targeted 2% as of the end of this year ( Reuters ). Taking into account currently extremely low Japan CPI figures, this is going to be very challenging task for BOJ during this year.

The currency pair USD/JPY finished week at level  108.08.

FUNDAMENTALS WEEKLY UPDATE :  

Short review of major fundamentals released during previous week is following:

Monday, April 04, 2016 :

  1. US Labor Market Conditions Index Change: results for March show modest improvement to -2.1 from previous -2.5, however still well below market expectations of +1.5.
  2. US Factory Orders (MoM) : results for February show modest decrease in new factory orders from domestic manufacturers of -1.7%, in relation to previous +1.6% , but quite close to market expectation of -1.8%.
  3. US Durable Goods Orders (MoM): February forecast show no change in relation to previous month of -2.8%.

Tuesday, April 05, 2016 :

  1. Japan Labor Cash Earnings (YoY): results for February show slight improvement of 0.9% on a year-on-year basis of pre-tax Japanese employees earnings, comparing to 0.0% previously released and above market expectation of 0.2%.
  2. Japan Real Cash Earnings (YoY): results for February show increase of 0.4% on a year-on-year basis, compared to 0.00% previously released.
  3. Japan Nikkei PMI Services: results for March show modest decrease to 50.0 compared to 51.2 for February.
  4. Japan Nikkei PMI Composite: results for March are down to 49.9 from 51.0 in February.
  5. US Trade Balance: results for February confirm continuing trend in US trade balance deficit of -$47.06b, from -$45.7b for previous month and above market consensus of -$46.2b.
  6. US ISM Non-Manufacturing Composite: results for March show modest improvement in indicator to 54.5 from previously released 53.4 and slightly above market consensus of 54.1.

Wednesday, March30, 2016 :

  1. Japan Leading Index: preliminary result for February are down to 99.8 from 101.8 previously released.
  2. Japan Coincident Index: preliminary results for February are down to 110.3 from 113.5 previously released.
  3. US Fed Releases Minutes from March 15-16 FOMC Meeting. Minutes revealed that currently there is no clear path of US monetary policy considering FEDs concerns of spillover effect of world recession to US economy and high volatility of financial and oil prices. Market negatively reacted on such news pushing US Dollar further down.

Thursday, March31, 2016 :

  1. Japan Buying Foreign Bonds (April 01): data show modest increase in capital inflow of JPY 1555.1.b, compared to JPY 1164.1b for previous week.
  2. Japan Buying Foreign Stocks (April 01): data show modest capital inflow of JPY50.1b compared to previous week outflow of JPY-30.0b.
  3. US Initial Jobless Claims decreased by 9k to 267K compared to 276K for previous week. The figure is also below market estimate of 270K.
  4. US Consumer Credit: results for February show modest increase to $17.22b compared to $10.53b previously and above market expectation of $14.9b.
  5. US Fed`s Yellen in New York, with Greenspan, Bernanke and Volcker. Current and former FED chairs agreed that US monetary policy must be viewed from broader perspective of global economic developments. Governor Yellen said that FED managed to reach one of set goals in terms of accomplishing full employment. Also, FED is targeting 2% inflation for this year, but it is not a cap.

Friday, April 01, 2016 :

  1. Japan Trade Balance –BOP Basis: results for February show modest increase in trade balance surplus to JPY425.0b from JPY411.0b previously. However, the figure is below market expectation of JPY429.7b.
  2. Japan Consumer Confidence Index: results for March show increase in confidence of Japanese consumers to 41.7 from previously 40.1, also above market consensus of 40.4.
  3. US Wholesale Inventories: results for February show decrease in wholesale inventories of -0.5% compared to previous month +0.2%. Result is also above market expectation of -0.2%.

 FORECAST FOR THE COMING WEEK

Below are some of the significant indicators to watch during next week:

Fundamentals 11-15 April

US Advance Retail Sales: results for March will be released showing demand and consumer confidence. Market is expecting increase in sales of 0.1%, improvement from -0.1% released for previous month.

US Business Inventories: result for February will be released. Market is expecting decrease in unsold inventories of -0.1% compared to previous month modest increase of +0.1%.

US Consumer Price Index : results for March will be released on a both monthly and yearly basis. Considering importance of CPI figure for future course of FEDs actions, any surprises in this indicator might impose reaction from market. Previous result is 1.0% on a year-on-year basis, while market consensus is at 1.1%.

US Consumer Price Index excluding Food and Energy:  results for March will be released on a both monthly and yearly basis exposing US core inflation. Previously, core CPI was standing at 2.3% on a yearly basis, while current market expectation is set on 2.2%.

Japan Industrial Production: forecasted February data will be released giving insight to market regarding current state of Japan IP. Previously released data stand at -1.5%.

 

 

 

USD/JPY Technical Analysis

During last week currency pair breaks long term support level at 110.8, finding new support at level of 108. This level had also been tested during October 2014.

Break from 108 and further 107.6 would lead to long term support level at 105.7. This level had also been tested during October 2014.

On the resistance side, break from 108 would lead to long term resistance of 110.8. Next short term resistance is set at 111.56 and  112.33.

Relative Strength Index over 14-day period has reached clear oversold side with value around 24, implying on trend reversal.

Graph 11-15 April

 

 

 

 

 

 

 

 

 

 

 

USD/JPY daily graph with support and resistance lines, RSI and MA

USD/JPY MARKET FORECAST

  • Forecast made by Bank of Scotia as of 31st March 2016 is bullish on currency pair and is as follows:

 

Bank of Scotia 04-08 April

 

 

Full report can be found under : Bank of Scotia Foreign Exchange Outlook

  • As per Trading Economics forecast model, based on calibrated autoregressive integrated moving average, expectations are also on bullish side until the year end. Latest forecasted figures, as of 09th April are following:

Trading Economics 11-15 April

 

 

Full report can be found at: Trading Economics

  • Analysts at Barclays bank are expecting to see currency pair down to levels of 100 in next quarters : Bank Forecast.
  • Morgan Stanley expects USD/JPY to reach 117 in the near future : Bank Forecast.
  • Deutsche bank said it is much more likely for USD/JPY to fall below 110 in the next several months : Bank Forecast.
  • Barclays Capital sees currency pair at 106.65 : Bank Forecast.

 

Waiting for BOJ, next week I am neutral on USD/JPY

Dovish FED talk is making markets quite nervous. Last week we have seen further Dollar lows versus Yen, reaching level of 108. Such move was not supported by actual fundamentals but with FEDs quite unclear statements on future policy moves. Increase of interest rates is still very depended on world  economic developments, and its potential spillover on US economy. Although we have not seen reaction from BOJ, Japan Finance Minister Aso made a call for action, considering that new highs of Yen are not desirable for economy that is struggling to revert slowdown trend. Japanese Yen had been safe haven for many past years, and market is still convinced that BOJ will not conduct market intervention. However, we must take into account that BOJ has significant history in direct market interventions during past decades. Although they had abandoned this practice, I am not sure if we can completely exclude such possibility.

During last week currency pair breaks long term support level at 110.8, finding new support at level of 108. This level had also been tested during October 2014. Break of 108 would lead to new lows at 107.6 and further to 105.7 which is long term support level tested also during October 2014. On the opposite side there is possibility  that we might see move back to 110.8, considering that we finally have clear RSI oversold signal.

Anticipating possible market move during next week would be very challenging job for any analyst. I am staying neutral on currency pair for the next week, waiting on a first place reaction from BOJ. However, based on fundamentals, supported by technical analysis, I am staying long-term bullish on USD/JPY.

Recent Posts