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USD/JPY: Pair Trims Losses, Jumps Above ¥115 Selling pressure continued on Tuesday, but eased during the EU session and the pair trimmed most of the daily losses. The USD/JPY pair dropped to ¥114.21 during the Asian session, its lowest since Nov 2014, but managed to recover and jumped one big figure to stall around ¥115.20 during London trading hours.
The pace of the decline is very steep and suggests many big investors are exiting their long positions, with many speculants shorting the pair in anticipation of a further decline, which is driving the US dollar lower.
More importantly, it has been floated unofficially that prices around ¥116.00 or further lower are making the Bank of Japan uncomfortable and might be a problem for the central bank. Therefore, some verbal intervention is possible in the days ahead, if the pair continues to decline at this pace.
"Meanwhile, 10-year JGB yields are now negative, as is the whole curve out to 30-years: even 40-year yields are just above zero," analysts at Rabobank said in a note on Tuesday. The country with around a 250% debt-to-GDP ratio can refinance its debt with a negative interest rates for 10 years.
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Yen still in demand as Europe wakes up 11 Dec It's all about the yen and the demand is still there as European trading gets underway USDJPY now fallen to new session lows of 112.33 dragging other yen pairs down too.
Dangerous to get in the way of this move and I still say that any BOJ talk/checking rates would have only limited knee-jerk response, as indeed we've seen already this week.
The lack of any real rally yesterday was a big clue to the accelerated tumble.
Support/demand expected into 112.00-20 but plenty of offers/supply between 112.80-113.00 and once again, as with the SNB, traders will be ill-advised to think central banks can provide the required crutch for ever.
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JPY Intervention: 'Hard To Justify And May Ultimately Fail' - HSBC Direct FX intervention remains a major threat on USD/PY moves below 115as the move to negative rates by the Bank of Japan (BoJ) had only a fleeting impact on JPY and showed a desire for a weaker currency,argues HSBC.
"FX markets will have to remain mindful of the intervention threat, particularly in Japan.
This may take many forms,including rhetoric and more rate cuts (we expect two more later in 2016), but the growing event risk is that Japan intervenes directly in the FX market. Markets may mistakenly assume that, as interest rates up to 10 years are negative in Japan and yields on excess deposits at the BoJ are now negative, intervention may be more successful. After all, any counterpart to BoJ intervention will be sitting on JPY with a negative yield," HSBC clarifies.
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USD/JPY forecast for the week of February 15, 2016 The USD/JPY pair fell during the bulk of the week, but found enough support towards the end to turn things back around. We actually went as low as the 111 area or so, but did get a bit of a bounce. Ultimately, we do think that the market continues to go lower though, probably trying to reach the 110 level. Having said that, it’s probably going to be easier to trade this market on the short side from the daily charts, as there isn’t much in the way of room for longer-term traders to be involved in.
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USD/JPY: Pair Pressured Again, Drops Below ¥114 The greenback was trading weaker against the yen on Tuesday as sentiment suddenly deteriorated, sending the pair lower to daily lows of around ¥113.80.
Stocks erased their daily gains and turned negative, with the same trend seen in the pair, as it dropped sharply around 100 pips from daily highs. Moreover, the EUR/USD pair was also trading slightly higher.
From the US dollar perspective, the Empire State Manufacturing Index for February is due later in the day and is expected to confirm the ongoing manufacturing recession in the US as it is expected to remain in negative territory and print -10.00.
"It is this weakness in the US as well as rising evidence that the services sector is also hitting a sticky patch that is likely to constrain the prospect that the Fed can even consider raising rates on an economy that at best appears to be spinning its wheels, as it slowly moves forward," Michael Hewson, chief market analyst at CMC Markets UK, said in a note.
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USD/JPY forecast for the week of February 22, 2016 The USD/JPY pair initially tried to rally during the course of the week, but found enough resistance of the 150 level to turn things around and form a somewhat negative candle. Because of this, we find yourselves below the 113 level and it now looks as if the market is ready to go down to the 110 handle. There is a significant amount of support in that general vicinity though, so we do not think that the market will go much lower than that anytime soon. Keep in mind that this market tends to be very sensitive to risk appetite, so as stock markets ago, so will this pair.
Countdown to the Japanese financial year end and what it means for FX Much like seasonal bird migration in nature, we see yen migration at the end of the Japanese financial year Towards the end of March, and the Japanese fiscal year end, is historically a time that we can see some large flows in yen pairs. As Japanese firms look to close up their accounts and try to bolster the numbers, they repatriate profits back home meaning they buy yen.
The last few years haven't been as heavy for seeing these flows as previously. There's a few reasons for that. Partly it's due to the action of the BOJ in weakening the yen, and there's been an increase in Japanese firms moving operations offshore rather than exporting from Japan. The economic weakness in both Japan and the world means there's less trade, which can naturally reduce profits.
Exporters are the main movers of the currency around this time so we're likely to hear more chatter about market orders being linked to them on the offer side.
It's usually the last two weeks of March that these flows pick up, and the last day they usually do their business is three days before the year end.
As we're heading towards the Feb month end also, we could possibly start to see the London fixes start to show some of these yen moves. Options could also play their part as we could see some lumpy expiries through March.
The repatriation moves are not really something we can usually pinpoint and trade against (or with) but they will likely offer an explanation if we see some odd moves in yen pairs. As I say, the effect has lessened over the last few years so we may not get anything noticeable. Much like most things in the FX world, it's a case of forewarned is forearmed.
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USD/JPY: Pair Erases Friday's Gains, Drops to ¥113 The USD/JPY pair was trading 1% lower on Monday as bulls retreated during the Asian session and the greenback was seen dropping to the ¥113 mark during the London session.
From the US dollar point of view, the Chicago PMI for February should tick lower to 53.0 from 55.6 booked in January.
In the previous session, the US GDP was shown slowed to 1.0% in the fourth quarter, after 2.0% in the previous quarter. Analysts had expected the number to decline to just 0.4%. Moreover, the GDP price index fell from 1.3% to 0.9% and the PCE annualized indicator declined to 2.0% from 3.0% previously.
The greenback surged after these news and the pair pushed to the ¥114.00 handle, however, it erased all the gains on Monday.
"All in all, in spite of the improving inflation outlook, the current highly volatile environment and faltering risk sentiment could jeopardize the Fed's rate path. For these reasons, we do not expect the USD will appreciate substantially over the upcoming week. USD/JPY should remain under pressure," Arnaud Masset, Market Strategist at Swissquote Bank said on Monday.
The probability of a June hike rose to 35% from 24% last week, while a December hike jumped above the magic 50% level to 53% from 36% last week.
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USD/JPY: Greenback Turns Higher in Tranquil Session The greenback increased against the Japanese yen on Wednesday, erasing its earlier losses during the European market hours.
In the meantime, market sentiment slightly improved, shaking off the disappointment induced by sobering Chinese trade balance data on Tuesday, which induced additional worries over the health of the second biggest economy in the world.
Meanwhile, analysts speculated over further stimulus by the Chinese government and the People's Bank of China (PBoC) and their potential effects on the slowing economy.
''They remain skeptical as well that policy stimulus will prove as effective as hoped in supporting economic growth given that the transmission mechanism is impaired by problems in the banking sector,'' Bank of Tokyo-Mitsubishi UFJ currency analyst Lee Hardman mentioned.
On Wednesday, the USD/JPY added 0.38% to trade at ¥113.06, bouncing from the weekly low at ¥112.23, while the US dollar index was seen 0.02% lower at 97.14 points.
JPY Into BoJ - BNPP BNP Paribas expects the BoJ to leave policy on hold on Tuesday.
"While likely to take further action later in the year, particularly if the JPY begins to strengthen again, our economists suspect the central bank would prefer to observe the effects of the January measures as they play out through portfolio rebalancing channels," BNPP adds.
"EURJPY has corrected sharply higher in the aftermath of the ECB meeting, reversing some of the JPY’s notable outperformance earlier this year. We think this can extend further and remain positioned for further upside in the cross via a risk reversal," BNPP argues.
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