Week in FX Asia – Is the Yen’s Apocalyptic Move Over?

Expect Bernanke to play down the significance of one employment number – Friday’s headline print will do little to clarify the Fed’s QE tapering debate and by default the dollar’s position. This will make for a relatively volatile summer in FX, and by default making each future data point release to take on more significance.

All of this will become a bigger headache for Abenomics. This week’s breakdown in the Nikkei and USD/JPY will have many who have entered into the two most crowded trades (long Nikkei and short Yen) worried. The wild Yen move is trying to confirm technically, what many have believed was a correction of Abenomic rallies, may in fact be considered a reversal, especially now that the Nikkei has broken through its -25% correction level and USD/JPY printing a sub- ¥96.00 low.

Not making it any easier for the dollar and any equity bull this week is that the volume being traded is on the rise – signs of potential mass liquidation will only lead to similar moves like last Thursday’s ‘currency panic attack.’ The dollars positive reaction to the NFP release just shows how much of the mighty ‘buck’ had been oversold in the previous sessions on panic momentum.

What’s Japan to do to stem Abenomics opposition? The MoF will have to consider how far they can test the remaining G20 members if they ever contemplate implementing any “possible intervention.” Finance Minister Aso said that they are watching the currency moves, and there is no immediate need to intervene. Economic finance Minister Amari has indicated that equities and FX moves will continue to be driven by external factors.

 

WEEK AHEAD

* CNY New Yuan Loans
* JPY Bank of Japan Monetary Policy Statement
* JPY Bank of Japan Rate Decision
* JPY BOJ Target Rate
* GBP Gross Domestic Product Estimate
* NZD Reserve Bank of New Zealand Rate Decision
* AUD Unemployment Rate
* AUD Employment Change
* EUR ECB Publishes Monthly Report
* USD Advance Retail Sales
* JPY Bank of Japan May 21-22 meeting minutes
* USD U. of Michigan Confidence

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

Latest posts by Dean Popplewell (see all)