2019-11-11 • Updated
USD/JPY dropped to 110.45 on Tuesday. The yen has significantly extended its gains in recent days as geopolitical tensions heat up. Additional support came from the stronger Japan’s trade and current account figures. All-time dovish remarks reported from Bank of Japan Governor Kuroda, who was delivering his speech earlier today and yesterday, were not too big a driver. Governor noted that Japan’s economy continues to recover moderately; the BoJ is determined to maintain its QQE with the yield control for as long as it is needed to hit its long-coveted 2pct target.
Comments from banks
Deutsche Bank
Strategists recommend going long on USD/JPY targeting 114.00 level and entering the trade from 111.20.
The bank’s strategists note that the yen is still expensive on 2-year nominal rate differentials (they point to a fair value of 120 for USD/JPY!).
According to RSI indicator, USD/JPY is at quite extended levels to the downside.
Bank’s CORAX positioning data indicates that USD long positions have been pared significantly in the past months.
Morgan Stanley
Morgan Stanley analysts also suggest buying USD against the yen towards the end of this week.
They recommend buying from 111.30 with a target 115.00 and stop-loss at 110.00.
Their reasoning:
The yen is becoming more and more vulnerable to the changes of interest rate differentials with the BoJ keeping its yield-curve and asset-purchase programs unchanged. The new financial year has started, and Japanese investors might increase their demand for foreign assets.
The upcoming August inflation data may send mixed signals. The 12-month headline inflation rate is expected to rise to 3.6%, causing concerns for the Biden administration. However, core inflation, which excludes food and energy prices, is projected to decrease to 4.3%, aligning with the Federal Reserve's goals. Past price trends influence both figures, so looking at recent data for a more accurate picture is crucial.
The odds of a final interest rate hike by the US Federal Reserve (Fed) this year have dropped after US job openings hit their lowest levels since early 2021. This has led to a correction in the US Dollar as traders reduced their bets on further rate hikes.
Here we go again, my friends. It’s time to look critically into the future of what trading opportunities September might have in store for us. As always, it is essential to note that the views expressed here are mine and should not be considered financial advice without proper examination.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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