USD/JPY struggles to maintain rebound ahead of central banks, geopolitical risks
James Chen, CMT March 13, 2017 1:13 PM
This week is undeniably a busy one with four major central bank meetings, including the heavily anticipated FOMC on Wednesday and the Bank of Japan on Thursday.
- This week is undeniably a busy one with four major central bank meetings, including the heavily anticipated FOMC on Wednesday and the Bank of Japan on Thursday.
- On top of the central banks this week, major global political factors will also be front and center, including the likely triggering of Article 50 to begin the process of UK/EU separation (Brexit), Dutch elections in which the populist candidate is running a close race, and the G20 meetings towards the end of the week.
- Despite these geopolitical factors, risk assets continue to be well-supported while safe-havens like gold and the Japanese yen remain subdued for the time being.
- The US dollar has been pressured since Friday despite a better-than-expected US jobs report. Much of this pressure can be attributed to technical factors and that a March Fed rate hike, which is a near-inevitability at the current time, had likely already been priced-in to the previously rallying dollar.
- The Fed meets on Tuesday and Wednesday, and will issue its monetary policy decision followed by a press conference on Wednesday. Since a rate hike is so widely expected then, the focus has shifted to the pace of rate hikes going forward. Any hints or indications of a faster pace than the three in 2017 that were estimated by the Fed in December could lead to resumed US dollar strength.
- The Bank of Japan will announce its own policy decision on Thursday. No substantive changes to the BoJ’s generally dovish policies are expected to be made at this time. However, any indication of further alleviation in the central bank’s QE program could have a marked positive effect on the yen.
- Amid these potentially market-moving factors, USD/JPY continues to be driven mostly by Fed tightening policy and risk appetite as reflected in the still-buoyant equity markets.
- From a technical perspective, USD/JPY has made significant strides in March after having formed a key double-bottoming pattern around 111.50 in February. This has resulted in a move above 114.00. With any indications of accelerated tightening by the Fed, coupled with a continued risk-on market environment, USD/JPY is likely to extend its rebound and begin targeting higher price objectives at the key 116.00 and 118.00 resistance levels.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.