USD/JPY Weekly Fundamental Analysis July 14-18, 2014 Forecast The USD/JPY inched lower as markets moved to safe haven trading as problems in Portugal weighed on the global economy as well as an increase in tensions between Israel and Palestine which just added to the global stress. The pair ended the week at 101.32. The Japanese Yen finished the week marginally higher versus the US Dollar, but the fact that it trades near critical resistance (USDJPY at support) leaves it at risk. We’ll watch the coming week’s Bank of Japan interest rate decision with special interest. Markets have long waited for BoJ Governor Kuroda to signal further monetary policy easing is likely, and continued disappointments have kept the Yen from falling further versus the Dollar. Kuroda recently reiterated that the BoJ expects the domestic economy will continue recovering at a moderate pace and inflation will continue to rise. The lack of urgency for further policy action will likely keep the JPY contained, but any hawkish surprises could force a significant USDJPY decline. The Federal Reserve Board, trying to rectify a prolonged lull in U.S. output, has charted virtually a zero-interest policy for many months now, together with a bond-buying program known as Quantitative Easing. Both are predicated on the idea that this will stimulate economic activity or at least allow for repair of balance sheets (debt management) so that normal patterns can resume after the Great Recession. The Fed has begun to “taper” its QE and to talk about inching up its short-term rates, while generally guiding the market to expect no major tightening. So now, with new global anxieties adding to the mix, we are dipping back toward 2.5% on the 10-year Treasury bond.
Posted on: Sun, 13 Jul 2014 14:12:42 +0000
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