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USD JPY - FUNDAMENTAL ANALYSISThe Bank of Japan's (BoJ) monetary stance remained unchanged as they didn't convene, keeping the key policy rate at -0.10% and the 10-year yield at around zero percent due to Yield Curve Control. Several factors contributed to the Yen's weakening, including reassessments of the Federal Reserve's monetary tightening outlook, which generally boosted the dollar. The 10-year breakeven rose significantly, hinting at rising inflation expectations in Japan. With inflation hitting new highs and property values also increasing, real yields in Japan are falling. Despite rising inflation, the BoJ's apparent lack of urgency to change its current monetary stance has also influenced the Yen's movement. However, there are suggestions that the BoJ might change its Yield Curve Control without much warning. With possible political factors also in play, the overall view, according to analysts at MUFG, is of limited scope for further rise in the USD/JPY exchange rate, given the Fed's projected pause in June. Japanese Yen Performance in May The Yen's performance against other major currencies in May has been mixed, the Japanese currency saw a depreciation against the US dollar but a strengthening against the Euro. "In May the yen weakened further versus the US dollar in terms of London closing rates from 136.09 to 139.68" says Derek Halpenny, Head of Research, Global Markets EMEA and International Securities at MUFG. Bank of Japan's Monetary Stance Despite the fluctuations, there hasn't been a change in the monetary policy of the Bank of Japan (BoJ). The central bank's current stance remained steady with a key policy rate of -0.10% and the ten-year yield managed within a +/- 50bps range due to Yield Curve Control (YCC). "The BoJ did not meet in May and hence its current monetary stance was unchanged with the key policy rate at -0.10% and YCC restraining the 10-year yield within a range of +/-50bps around zero percent," says Halpenny. Factors Influencing the JPY's Exchange Rate Performance Several macroeconomic dynamics influenced the Yen's performance in May. A crucial contributor to these dynamics was a reappraisal of the Federal Reserve's perspective on monetary policy tightening in the US, which resulted in a strengthening of the US dollar. "Firstly, the reassessment of the outlook for monetary tightening by the Fed helped lift the dollar in general in May and that helped propel USD/JPY higher," Halpenny states. He adds, "From close to a zero probability, OIS pricing now indicates around a 50% probability of another rate hike by the Fed." Furthermore, the Yen's value was impacted by domestic economic indicators. There's been a significant increase in real yields (the returns on investments that have been adjusted for the effects of inflation) in Japan, accompanied by a surge in inflation expectations. "Real yields have been falling sharply in Japan with inflation expectations jumping. The 10yr breakeven jumped 20bps in May and reached close to 1.00%, the highest since June 2022," Halpenny notes. Impact of Asset Price Inflation The rising inflation in Japan wasn't just limited to goods and services, but also included a surge in asset prices. A broad spectrum of assets, including the Topix Index, property prices, and land prices, experienced significant gains. The TOPIX, or Tokyo Stock Price Index, is a broad stock market index that tracks all domestic companies listed on the First Section of the Tokyo Stock Exchange (TSE), the largest stock market in Japan. It includes a wide range of company sizes and sectors, making it a comprehensive barometer of the overall Japanese equity market. "The Topix Index surged 3.6% in May in contrast to a 0.2% gain in the S&P 500. Property prices and land prices are also moving higher in Japan," says Halpenny. Despite the rising inflation and falling real yields, the BoJ appears untroubled about the situation and is in no hurry to change its monetary policy. "Adding to yen selling is the clear sense of a lack of urgency from Governor Ueda to change the current monetary stance," says Halpenny. However, there are signs that the BoJ might spring a surprise and make quick alterations to its YCC policy. "We suspect the BoJ could pivot quickly and alter YCC without much warning," Halpenny states. In the backdrop of all these factors, the outlook for the Yen seems nuanced. The combination of increasing inflation, changing monetary policy stances, and political factors all paint a picture of restrained potential for further appreciation of the Yen against the US Dollar, especially with a projected pause in the Federal Reserve's policy actions in June. "With the Fed set to pause in June, we see limited scope for USD/JPY to move higher from here," Halpenny concludes.
Short
by thunderpips
3
USD JPY - FUNDAMENTAL ANALYSISUSD/JPY has reversed from a high near 141, largely on the back of shrinking expectations that the Fed would hike in June. That is now priced with a 25% probability rather than a 70% probability attached to it last month. We have noted that the current environment should continue to see interest in carry trade strategies – where the Japanese yen scores poorly. However, USD/JPY looks overvalued relative to the terms of trade story – which is much better for the yen than a year ago. In addition, there is still the risk that the Bank of Japan surprises on 16 June by further normalising its Yield Curve Control policy. That would be a yen positive. And thus it would not be a surprise to see speculator investors trying to re-position short USD/JPY above 140 – even if such a strategy has already proved painful this year.
Short
by thunderpips
2
✨NEW: USDJPY ✨ SWING TRADE ✨SLO @ 144.05 ⏳ SSO @ 138.33 ⏳ TP1 @ 134.00 (shaving 25%) TP2 @ 125.50 (shaving 25%) TP3 @ 119.25 (shaving 25%) TP4 @ 110.75 (shaving 25%) TP5 @ 103.85 (shaving 25%) BSO @ 101.66 ⏳ BLO @ 99.66 ⏳ ADDITIONAL INFO: TP1 @ 134.00, before Pivot Low TP2 @ 125.50, at Mid-Pivot TP3 @ 119.25, at Major Support TP4 @ 110.75, above Upper Demand TP5 @ 103.85, above Lower Demand BSO @ 101.66, after Price Action drops below TECHNICAL ANALYSIS: As of June 1, 2023, the USDJPY is trading around 139.80. The RSI is overbought, which indicates that the market is due for a correction. The MACD is also starting to turn down, which could be another sign that the trend is about to change. ⚠️Be mindful that the moving averages are all sloping upwards, which is a bullish sign. Overall, the technical analysis for the USDJPY is mixed. There are some bullish signs, however the bearish signs seem to be forging ahead. Traders should be cautious and wait for a clear downtrend to emerge before taking any short trades. Here are some of the key levels to watch for: * SUPPORT: 139.45 ⚠️ For a more aggressive approach, you can place a Market Order to Sell once price opens and closes below Support * RESISTANCE: 140.65 ⚠️ For a more aggressive approach, you can place a Market Order to Buy once price opens and closes above Resistance If the price breaks below the support level, it could signal a change in trend to the downside. If the price breaks above the resistance level, it could signal a continuation of the bullish trend. Here are some of the factors that could affect the USDJPY in the near future: * The US Federal Reserve's interest rate decision on June 15. * The Japanese government's economic data releases. Traders should keep an eye on these factors and adjust their positions accordingly.
Short
by ProfessorCEWard
Why we may soon see some JPY strengthThe JPY is undervalued... Unlike other global economies, Japan is not facing an inflation crisis or below 50 PMI figures. The Yen has also been victim to some large bearish moves over the last few years, which are due a retrace move. In my opinion, it is starting to look like a good buy from both a fundamental and technical point of view. As a safe haven currency, it could also see some strength with the nearing Western recession, if the recession ever comes! All is not roses, though. GDP growth is low and unemployment is too low... There is also the issue with the BOJ's currently monetary policy. The challenge is, which pair do you short? The JPY against the EUR or GBP is a strong fundamental trade, but the swap rates will eat away at profits on any long-term trade. The CHFJPY has a move attractive swap, though still negative, but you then lose the safe haven bias of trading both the CHF and JPY. Speaking of CHFJPY, price has just broken a possible turnaround area on the 1 hour chart, which could be a signal of some coming JPY strength and ***JPY downside. For longer-term trades, perhaps a Yen ETF or currency index trade is best... AMEX:YCL AMEX:FXY OANDA:CHFJPY
Short
by Samuel_Morton_Trader
USD JPY - FUNDAMENTAL ANALYSISThe US dollar (USD) has staged a comeback against the Pound Sterling (GBP) and Euro (EUR) over the past few weeks, but foreign exchange analysts at MUFG still consider that medium-term depreciation is the most likely outcome. The bank considers that the US Dollar exchange rates are overvalued, especially against the Japanese Yen (JPY) and net capital flows are likely to be less supportive. It also considers that the Euro-Zone and Chinese outlooks are more favourable, especially given that gas prices have declined sharply. MUFG also expects the Fed will cut rates before the ECB while the Bank of Japan will tighten policy. Monetary policy will inevitably be a key aspect. Although the immediate debate is still surrounding the potential for further interest rate hikes, MUFG expects the debate will switch to the potential for a Federal Reserve policy reversal as the US economy deteriorates. According to the bank; “ The Fed will be cutting rates prior to the ECB. Inflation in Europe is stickier due to energy and food prices and the Fed will have much more scope to respond once economic conditions in the US weaken further from here. ” After an extended period of quantitative easing, MUFG also expects that the ECB quantitative tightening programme through bond sales will put upward pressure on longer-term yields and support the Euro. Global Growth Trends Still Favourable MUFG notes that previous forecasts of an extended UK recession have been revised away and the Euro-Zone has also been resilient. As far as China is concerned it adds; “ Recent data has disappointed, in particular on the manufacturing side of the economy, but pent-up domestic demand likely has further to run which will act as a source of global growth this year. ” Although market sentiment has been more cautious, it expects overall growth dynamics will not favour the US dollar as Asia rebounds. A related issue is the key area of energy prices. The jump in energy costs last year was a key reason why agencies such as the IMF and central banks were so negative surrounding the European economic outlook last year. Gas prices have, however, declined sharply with a slump from over 90% from the peak and close to 2-year lows. Gas storage levels are also at very high levels in historic terms ang MUFG expects storage levels will hit 100% in the summer. In this context, lower gas prices will improve the growth outlook and strengthen the trade outlook. The Bank of Japan has resisted tightening monetary policy, but MUFG notes that the economy is strengthening and inflation has increased. According to MUFG; “ we maintain that YCC has passed its sell-by-date and while it remains unclear whether price stability at 2% can be achieved, the BoJ will still move to widen the band or scrap it completely. ” The bank expects that the yen will strengthen sharply if the Bank of Japan lets yields increase which will drag the dollar lower. Negative Long-Term US Debt Dynamics The immediate focus is on the US debt ceiling and political brinkmanship ahead of early June when the US Treasury will run out of cash. These short-term dynamics are mixed for the US dollar with concerns over the economy, but potential defensive support if risk appetite deteriorates. MUFG focusses on the underlying debt dynamics and the potentially unsustainable situation. MUFG notes that the budget deficit in the first seven months of fiscal 2022/23 amounted to $928bn from $360bn the previous year. On a longer-term view, in considers the debt dynamics will be potentially negative for the US currency. De-Dollarization Hype Although MUFG considers that the de-dollarization rhetoric is rather more hype than substance, there is still the risk that long-term confidence in the dollar will decline with scope for some further increase in Euro and yuan central bank reserve holdings. MUFG also notes that there has been strong central bank gold buying and it expects this trend will continue. The bank also sees a risk that the US use of financial sanctions will discourage official players to hold reserves in the dollar due to fears over asset freezes. MUFG notes that there has been an extended period of Wall Street out-performance, but expects this trend will reverse and net capital flows will be less supportive for the US currency. It adds; “ We see a renewed drop in US equities as investors position more assertively for US recession. ” Japan’s Nikkei 225 index has posted a 32-year high and the German DAX index has hit a record high. It also sees scope for a sustained rebound in emerging-market equities after an extended period of under-performance. It adds; “ A reversal of the current period of deep EM undervaluation poses downside risks for the USD in the medium-term. ” Long-Term Peak, Dollar Overvalued MUFG notes that the dollar last year reached the highest level for over 20 years. It also notes that at the October peak the currency index was 2 standard deviations stronger than the average over the past 40 years. It adds; “ Similar extreme levels of USD overvaluation were last recorded in the early 2000’s and mid-1980’s and subsequently proved to be long-term bearish turning points for the USD. ” The bank also considers that the dollar is substantially overvalued, especially against the yen, increasing the likelihood of mean reversion.
Short
by thunderpips
Sovereign Debt Crisis - Cracks Showing in the Yen?Long position on OANDA:USDJPY Interest rates on US dollars are rising globally, at a very rapid rate. Capital has been flowing towards the United States for the last couple years, as a global flight to security occurs as fear rises in markets during times of turmoil. Because the US Dollar is the reserve currency of the globe, debts backed by US Treasuries are quickly becoming expensive - particularly for sovereigns. Sovereign debt, particularly long-tenor notes and bonds, have demonstrated to be very illiquid in the last decade. Globally, central banks have attempted to combat this issue with lower interest rates and quantitative easing. This theory, however is fundamentally flawed since it does not address the lack of price discovery in these markets. Central banks can support these markets domestically, but without a foreign buyer they hold little value, and the currency will experience inflation relative to other currencies. In this instance, this is the US Dollar. See this chart of the British 10-Year Bond (Gilt) Futures, where there was a panic in the market a few months ago as pension funds holding large quantities of Gilts were rendered insolvent. The same pattern can be observed on a USDGBP chart, as capital fled the nation and its debt lost value (rates rise). The crisis that nations now face, is that they are burning the candle at both ends. Japan has been employing strict interest rate controls, and extraordinary liquidity-providing measures to domestic banks for decades to stimulate inflation. In the past couple months however, they have begun to employ currency controls, to curb the loss of value of the Yen in FX markets. Despite this inflation they have had little success stimulating growth domestically. Negative rates reflect a negative demand for sovereign debt, as if the entity "buying" it must be paid to do so. Rates have also gone negative in Europe, see the financial capital, Germany, has struggled since 2009 to find a market for its debt. US banks are reluctant to lend via repo to European banks for their sovereign entities possess such great risk The Reverse Repo facility (RRP) has become a black hole for capital around the globe. During QE it offered the highest return on cash for money-market funds and other money market participants. As rates rise globally, so too does risk. As markets like Europe are unable to keep up with the rise in rates as is occurring in the United States, so capital will continue to flee these nations under duress and create a feedback loop. The RRP is a zero-risk investment, so offers a safe home for flighty capital looking to liquidate long-term debt. See chart of Yen, inverse Euro and RRP usage The Bank of Japan has become unable to control the market on its 10-year debt security, and it will continue to rise and push against the imaginary "ceiling" imposed on it, until a currency crisis occurs and a crisis in sovereign debt markets may begin to be realised. Capital will flow very quickly towards the United States in this event. Since it is the financial capital of the world still, as it is the reserve currency of most foreign governments, any assets priced in US dollars will grow in value. Particularly equities, this will be a theme in markets over the following years. War in Ukraine will continue to create massive inflationary pressure globally, as capital concentrates around a very expensive and complicated geopolitical conflict. Rates will continue to rise until this is resolved, and sovereign debt will quickly become un-affordable as the price falls due to rate increases. Debt is already concentrating in short-term debt markets, like REPO, FIMA, SOFR and so on. Pension and mutual funds will quickly be rendered insolvent as they are the parties which hold gigantic quantities of these dangerously illiquid bonds. BEWARE of these markets, they are a ticking time bomb and all global currencies have a massive exposure.
Long
by FPS_Denny
1
USD JPY - FUNDAMENTAL ANALYSISForeign exchange analysts at Goldman Sachs still expect that the US Dollar to lose ground over 2023 as a whole, but expect this will take longer than expected previously due to US and global developments. It notes; “Our underlying view for FX markets this year is that we are likely to see only a “bumpy deceleration” for the Dollar, because slack in the US economy is still limited, and we are still “waiting for a challenger.” The 3-month Dollar to Yen (USD/JPY) exchange rate has been revised higher to 140 from 132 previously while the 6-month forecast has been revised to 135 from 125. The 12-month forecast remains at 125.0. From a longer-term perspective, Goldman still expects that the dollar will lose ground, but it considers that the short-term perspective has changed slightly. It adds; “we think the recent rally in the broad Dollar more appropriately reflects the fine balance facing currency markets at the moment.” Goldman points out that the US economy has performed more strongly than expected after the Silicon Valley Bank collapse in March. According to Goldman; “In the US, recent data on credit conditions have been a bit better than feared. And cost pressures have eased somewhat but remain a top priority, so that a number of Fed officials have said they still see some risk that rates may ultimately have to rise further.” Another key element for exchange rates is that dollar selling necessitates the buying of another currency. In this context, Goldman is less confident that there are attractive alternatives. The narrative earlier in the year was of a strong rebound in China and notable resilience in the Euro-Zone. Both these elements have come into doubt over the next few weeks. The Bank of Japan has also not engaged in any shift in monetary policy with the ceiling for the 10-year yield held at 0.5%. The delay in tightening policy has undermined the yen in global markets. Goldman adds; “Dollar depreciation usually coincides with strong activity in the rest of the world, not US underperformance. We think recent developments all support this view, and should also support some further Dollar strength over the near term.” The 3,6 and 12-month Euro to Dollar (EUR/USD) exchange rate forecasts are unchanged at 1.05,1.05 and 1.10 respectively.
Short
by thunderpips
USD JPY - FUNDAMENTAL ANALYSISThe US dollar has hit a fresh year to date high overnight against the yen at 138.87 as it continues to extend its advance from the low of 133.75 recorded on 11th May. Over that period the yen has been the worst performing G10 currency alongside the Scandi currencies of the Swedish krona and Norwegian krone which have declined by over 2% against the US dollar. The recent move higher in USD/JPY has coincided with the ongoing adjustment higher in US rates. 2-year and 10-year US government bond yields have closed higher for seven consecutive days which is the longest run of higher closing prices since September of last year. It was also a period of yen weakness when USD/JPY was breaking above the 140.00-level for the first time since the middle of 1998. According to the latest CFTC report, leveraged funds have been paring back the size of their short yen positions this month although they still remain close to levels from back in autumn of last year when USD/JPY hit its current cycle high. The BoJ’s ongoing reluctance to tighten monetary policy further in the near-term combined with recent adjustment higher in US rates has triggered renewed upward momentum for USD/JPY. The move higher in US rates was encouraged yesterday by reassuring comments following a meeting between President Biden and House speaker McCarthy on the debt ceiling. After the talks, House speaker McCarthy stated that “the tone was better than any other time we have had discussions”. Both President Biden and House leader McCarthy acknowledged that the talks had been productive although they have not yet reached an agreement. President Biden stated that “we reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement”. House leader McCarthy expects to speak with President Biden on a daily basis until a deal has been reached. The developments support market expectations that a compromise agreement will be reached to raise the debt ceiling before the so-called “X-date”. If those expectations are seriously challenged in the coming weeks then it could trigger a squeeze of short yen positions and a sharp move lower in USD/JPY. At the same time, the move higher in US rates was encouraged yesterday by comments from Fed officials. St Louis Fed President Bullard stated that he is “thinking two more moves this year” to put enough downward pressure on inflation. He is a wellknown hawk and a non-voter on the FOMC this year. The hawkish comments from St Louis Fed President Bullard were partially offset by relatively more cautious comments from Minneapolis Fed President Kashkari who stated “we may have to go higher from here, but we may not raise rates quite as aggressively and as quickly as we have over the course of the past year”. He also believes it’s a close call as to whether the Fed raises rates further in June or skips that meeting. We would place more weight on his comments as he is a voter on the FOMC this year. June rate hike expectations have since edged higher again with the US rate market pricing in around 5bps of hikes.
Short
by thunderpips
2
USD JPY - FUNDAMENTAL ANALYSISDerek Halpenny, Head of Research, Global Markets, EMEA & International Securities at MUFG, suggests that the recent trend seeing a weaker Japanese Yen (JPY) may not last, due to the changing dynamics that drove the currency weaker in 2022. "We remain unconvinced that the trend in yen weakness can persist. The dynamics that drove the yen weaker in 2022 are changing and that will mean upside scope will be far less going forward," says Derek Halpenny. He further emphasises the significance of Japan's shifting trade data influenced by falling energy prices. "The turn in the energy markets that has seen the huge negative energy terms of trade shock start to reverse...we saw Japan’s trade deficit continue to shrink helped by falling energy prices," he adds. Japan's Trade Data Halpenny also details the notable decline in Japan's total imports, which fell 2.3% in April, the first drop since January 2021. "A shrinkage in the trade deficit was further helped by a 2.6% increase in exports. Japan’s energy import bill is now falling sharply – the annual change was -17.7% in April which contributed to 5.0ppts of decline in overall imports," says Halpenny. He also addresses the influence of US rate expectations on the yen, implying a potential reversal in the USD/JPY trend when this momentum fades. "Of course this underlying change for the yen will play second fiddle to rate expectations in the US which is the current driver of the move higher in USD/JPY but will add potential impetus the other way when the US rates momentum fades, which it inevitably will do going forward," Halpenny adds.
Short
by thunderpips
USD JPY - FUNDAMENTAL ANALYSISThe US Dollar to Yen (USD/JPY) exchange rate has rallied on Thursday, amid hopes surrounding the US debt ceiling talks, strong US job data, and upbeat US data releases. Derek Halpenny, Head of Research, Global Markets, EMEA & International Securities at MUFG, suggests that the recent trend seeing a weaker Japanese Yen (JPY) may not last, due to the changing dynamics that drove the currency weaker in 2022. "We remain unconvinced that the trend in yen weakness can persist. The dynamics that drove the yen weaker in 2022 are changing and that will mean upside scope will be far less going forward," says Derek Halpenny. He further emphasises the significance of Japan's shifting trade data influenced by falling energy prices. "The turn in the energy markets that has seen the huge negative energy terms of trade shock start to reverse...we saw Japan’s trade deficit continue to shrink helped by falling energy prices," he adds. Japan's Trade Data Halpenny also details the notable decline in Japan's total imports, which fell 2.3% in April, the first drop since January 2021. "A shrinkage in the trade deficit was further helped by a 2.6% increase in exports. Japan’s energy import bill is now falling sharply – the annual change was -17.7% in April which contributed to 5.0ppts of decline in overall imports," says Halpenny. He also addresses the influence of US rate expectations on the yen, implying a potential reversal in the USD/JPY trend when this momentum fades. "Of course this underlying change for the yen will play second fiddle to rate expectations in the US which is the current driver of the move higher in USD/JPY but will add potential impetus the other way when the US rates momentum fades, which it inevitably will do going forward," Halpenny adds.
Short
by thunderpips
2
Joe G2H Trade@ Buying USDJPYTrade Idea: Buying USDJPY Reasoning: Pullback into newly formed support on the daily. Entry Level: 138.104 Take Profit Level: 139.58 Stop Loss: 137.50 Risk/Reward: 2.4/1 Disclaimer – Signal Centre. Please be reminded – you alone are responsible for your trading – both gains and losses. There is a very high degree of risk involved in trading. The technical analysis , like all indicators, strategies, columns, articles and other features accessible on/though this site is for informational purposes only and should not be construed as investment advice by you. Your use of the technical analysis , as would also your use of all mentioned indicators, strategies, columns, articles and all other features, is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness (including suitability) of the information. You should assess the risk of any trade with your financial adviser and make your own independent decision(s) regarding any tradable products which may be the subject matter of the technical analysis or any of the said indicators, strategies, columns, articles and all other features.
Long
by Signal_Centre