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USD/JPY: Pair Advances as US Dollar Seen Broadly Bid
The USD/JPY pair was marching higher on Wednesday and was seen 0.57% stronger, trading around ¥109.75 during the midday session.
The greenback was seen broadly higher and was advancing against all major peers, with the US dollar index booking a gain of 0.3% and nearing the key resistances around 95.00.
During the Asian session, Japanese GDP (annualized) for the first quarter notably improved from -1.1% to 1.7%, while the yearly change jumped to 0.4% from -0.3% booked in the previous quarter. Moreover, the GDP deflator moderated from 1.5% to 0.9%.
"The rebound in growth in Q1 was driven by private consumption which contributed 0.3 percentage point to growth, government consumption which contributed 0.1 percentage point to growth, and net trade which contributed 0.2 percentage point to growth. It was the largest positive contribution to growth from net trade since Q4 2014. In contrast non-residential investment was a drag on growth subtracting -0.2 percentage point from growth," analysts at the Bank of Tokyo-Mitsubishi wrote on Wednesday.
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USD/JPY: Dollar Advances, Eyes ¥110
The USD/JPY pair was marching higher during the London session on Tuesday and was 0.3% stronger, trading around ¥109.60, with a possible test of the ¥110 mark later in the day.
Stocks were trading somewhat higher on the day, which was prompted by the weaker yen, and the USD/JPY pair was erasing this week's losses, with the ¥110.00 level still being an important level for currency traders.
As the yen managed to rise around three big figures from the recent cycle lows, the fears of an imminent intervention eased a bit, which might support the yen again in the near future.
"Japanese Finance Minister Aso made further comments overnight on the yen in front of parliament. He stated that it was natural each country has a different view on the FX market which is clearly evident by strong US opposition to Japan intervening in the current market environment. US Treasury Secretary Lew clearly highlighted that there is a high hurdle for the yen price action to be considered disorderly which would justify intervention," analysts at Bank of Tokyo-Mitsubishi wrote on Tuesday.
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Its Japan CPI day! Here's what to expect
But first let me take a selfie an update on the Japan sales tax "hot or not?" question
April 2016 Japan BOJ national CPI ex-fresh food & energy 0.9% vs 1.0% exp y/y
April 2016 Japan national CPI ex-fresh food & energy (BOJ numbers)
USD/JPY forecast for the week of May 30, 2016
The USD/JPY pair initially fell during the course of the week but found enough support below to turn things back around and form a bit of a hammer. The hammer of course is a very bullish sign, and a break above the top of that hammer is a buying opportunity as far as we can see. A break above that level should send this market looking for the 115 level, but expect quite a bit of choppiness and you do have to keep in mind that this pair is highly sensitive to risk appetite.
Japan's LDP policy chief outlined a sales tax hike at the scheduled time
The ruling party in Japan is the LDP. Their head of policy, Tomomi Inada says she told PM Abe to consider raising the sales tax in April next yer by 1%
USD/JPY Technical Analysis: Pair Turns Flat, Upside Capped by Weak Dollar
The pair recovered to turn flat on Tuesday, moving above the ¥111 handle.
USD/JPY stabilized from its opening levels at ¥110.78 and is back at the ¥111 handle, after trading as high as ¥111.35.
The ongoing chatter surrounding a possible sales tax hike delay could continue to support the Nikkei and USD/JPY.
On the other side, a broadly weaker US dollar is capping upside. The USD index dropped -0.15% to 95.56.
Upside finds resistance at ¥111.758, which is a double top from Mar 18 and Apr 27, ahead of ¥111.91 which is the 100-day moving average.
On the downside, immediate support is seen at ¥110.48, which is the five-day moving average and below that at ¥110.18, the ten-day moving average.
Markets now focus on US PCE price index and consumer confidence data among others, for fresh momentum on the major.
USD/JPY: Pair Drops Below ¥110 as Abe Delays Sales Tax Hike
he yen booked gains against all its major peers after Prime Minister Shinzo Abe decided to delay the increase in the sales tax by two-and-a-half years, while an ex-Bank of Japan (BoJ) official spoke on monetary policy.
The pair traded 0.89% lower at ¥109.75 on Wednesday morning in Europe, breaking the important ¥110 handle.
Former BoJ board member Sayuri Shirai said at the end of the Asian session that the bank does not have much choice but to maintain a negative rate policy for now, as it would be considered monetary tightening.
She also said the BoJ should start by targeting 1% inflation instead of 2%, as the 2% target is currently too far away.
Shirai was not completely against negative rates, but she considered the timing of the unveiling of the policy poor.
She left the BoJ on 31 March after five years, during which she generally voted with bank Governor Haruhiko Kuroda, but she was one of the four dissenters that voted against the introduction of negative rates in January.
She declared that the bank needs to communicate its decisions better, an ironic thing to say from someone that left two months ago.
"Before taking any more action, it's important for the BoJ to make strong efforts to let the Japanese people know what they are doing. Without doing this, the impact of any policy will be diminished."
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USD/JPY: Pair Approaches ¥109 as Abe Delays Sales Tax Hike
The yen booked gains against all its major peers after Prime Minister Shinzo Abe decided to delay the increase in the sales tax by two-and-a-half years, while an ex-Bank of Japan (BoJ) official spoke on monetary policy.
The pair traded 1.24% lower at ¥109.33 on Wednesday afternoon in Europe, breaking the important ¥110 handle.
Former BoJ board member Sayuri Shirai said at the end of the Asian session that the bank does not have much choice but to maintain a negative rate policy for now, as it would be considered monetary tightening.
She also said the BoJ should start by targeting 1% inflation instead of 2%, as the 2% target is currently too far away.
Shirai was not completely against negative rates, but she considered the timing of the unveiling of the policy poor.
She left the BoJ on 31 March after five years, during which she generally voted with bank Governor Haruhiko Kuroda, but she was one of the four dissenters that voted against the introduction of negative rates in January.
She declared that the bank needs to communicate its decisions better, an ironic thing to say from someone that left two months ago.
"Before taking any more action, it's important for the BoJ to make strong efforts to let the Japanese people know what they are doing. Without doing this, the impact of any policy will be diminished."
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USD/JPY: Opposing Forces: Where To Target?
The nominal yield spread between the US and Japan is set to widen further with the Fed likely to raise rates for the second time in either June or July, thus providing support for USD/JPY. However, the opposing force of Japan’s rapidly expanding current account surplus likely means the upside for USD/JPY will be limited.
Japan recorded a Q1 surplus of 4.6% of GDP, approaching record levels. The Abe administration has been clear in its opposition to yen strength although the G-7 finance ministers’ meeting in Japan revealed opposition to intervention by Japan.
But ultimately the yen is set to remain broadly underpinned by the substantial turnaround in Japan’s external position. Trade data for April revealed that Japan’s trade surplus widened more than expected, to a seasonally adjusted JPY 426.6bn, the largest surplus since February 2011. The turnaround in just 12mths has been dramatic – the 12mth deficit to April was JPY 200bn versus a deficit of JPY 8.36trn in the 12mths to April 2015. Risk aversion will need to ease on a sustained basis in order to see the yen weaken given the rapid expansion of the overall current account surplus, which in Q1 reached 4.6% of GDP.
We have adjusted our USD/JPY forecast levels to reflect the jump in May and the potential for the Fed to hike in June or July, but we continue to expect the yen to remain well supported. Our end-2016 USD/JPY forecast is 104.00.
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