(MENAFN- DailyFX) Talking Points:
. If you're looking for long-term analysis on the Yen, check out our . Fundamental Forecast for JPY: Neutral
Want to see how other traders are approaching USD/JPY? Check out our .
USD/JPY Breaks the June Trend
It was a week of pullback for USD/JPY , as the Yen caught a bid in the early portion of the week . This led to rather concerted drops in pairs like GBP/JPY or EUR/JPY shortly after this week's open; but support caught in each pair early on Tuesday morning and prices put in a bit of recovery as we moved towards the end of the week. In the major pair of USD/JPY, a prior up-trend was nullified by that Sunday/Monday selling, and USD/JPY broke below a bullish trend-channel that had built in the first half of June. After a recovery, resistance came in from the underside of that channel, leading to a fall back-below the vaulted psychological level of 110.00.
USD/JPY Four-Hour Chart: Break-Below June Bullish Channel, Back-Below 110.00 Chart prepared by
Japan Inflation Remains Subdued After Earlier-Year Spike
The big data item , which was released to a slight improvement from last month's .6% print to come-in at .7%. But this is still well-below the earlier-year levels of 1.4 and 1.5% that printed during January and February; and this further raises questions around the effectiveness of the BoJ's current QE policy given the recent inflation slowdown despite the fact that the bank remains near ‘pedal to the floor' levels of accommodation.
This continued lag in inflation also helps to remove any additional motivation that might be building to look towards a nearby stimulus exit. This can help the currency to continue functioning as an attractive funding vehicle in ‘risk on' types of market environments; while also making Yen-strength a likely theme during periods of risk aversion, as those ‘carry trade' bets leave the market for safer harbors.
Japanese Headline CPI Comes in at .7% For the Month of May, 2018 Chart prepared by
Next Week's Drivers out of Japan is rather light, with no high-impact announcements on the docket and a smattering of medium-impact releases set throughout the week. BoJ meeting minutes are released shortly after the Sunday open, and retail trade numbers, industrial production and consumer confidence are released on Wednesday, Thursday and Friday of next week.
DailyFX Economic Calendar: High-Impact JPY Events for Week of June 25, 2018 Chart prepared by
The more pronounced drivers will likely emanate from global risk trends. US equities have seen various forms of bearish since last weeks' FOMC and ECB rate decisions, and this has a tendency to help to produce Yen-strength. If we do see a continuation of risk aversion in key risk markets such as US stocks, that can keep the bid behind the Yen for the near-term. On the other hand, should we see a return of the risk-on trade, Yen weakness may become attractive again under the drive that the BoJ will likely remain as one of the more loose and passive Central Bank's in the world, as afforded by a continued lag with inflationary pressure.
The forecast for next week will be set to neutral.
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our have a section for each major currency, and we also offer a plethora of resources on -pairs such as , , , . Traders can also stay up with near-term positioning via our .
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--- Written by James Stanley, Strategist for DailyFX.com
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