Week in FX Asia -Yen Bears Are Beginning To See The Light

The Yen bears will take anything – at this point they do not really care. After a month of struggling to break the psychological ¥100 barrier, the bears must now feel more confident after Friday’s NFP print that another positive US data print over the next two-weeks could finally prove to be the catalyst that allows the market to punch through this imaginary barrier.

Friday’s US employment headline employment print (+165K) coupled with the previous two-months strong revisions higher (+114k) has favored the ‘mighty dollar,’ sending it higher, temporarily at least, against both the EUR and JPY as the market remembers that the Fed can also ‘decrease’ its bond buying, as reiterated earlier this week at the FOMC meeting. USD/JPY quest may be made easier this time around if there are not as many option barrier plays built up just under the ¥100.

Despite Abenomics continuing to attract its share of skeptics, Kuroda’s bold efforts to reinvigorate his economy is clearly driving improvements in sentiment and inflation expectations (April manufacturing activity – 51.1 vs. 50.4 and March IP up for the fourth straight month +0.2%, m/m), which in turn should provide a solid base for further fundamental gains. A weaker Yen continues to boost export demand while household spending continues to rise and Japanese unemployment rate falls (+4.1% vs. +4.3%). Even offbeat measures (core-core CPI) suggest that the BoJ’s drive to +2% inflation target is on the move.

“It is just a matter of time until the rest of the world catches up with the reality of how Japan’s experiment affects them. The hope is that, bolstered by evidence of Japan’s serious pursuit of structural reforms, they will accommodate the experiment in two ways: by not retaliating, and by undertaking their own domestic reforms that compensate for the output lost to Japan. In other words, a growing pie for all better accommodates all” – Mohamed A. El-Erian, CEO PIMCO



* EUR Euro-Zone Retail Sales
* AUD Reserve Bank of Australia Rate Decision
* AUD Employment Change
* GBP Bank of England Rate Decision
* CAD Unemployment Rate

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