Forex Analysis: Japanese Yen Recovery Looks Likely to Continue

The Japanese Yen looks likely to continue to recover amid profit-taking before next week’s BOJ rate decision and as risk appetite stumbles.

Talking Points

  • Japanese Yen Outperforms on Profit-Taking, Risk Aversion in Asia
  • S&P 500 Futures Hint Sentiment Likely to Remain Under Pressure
  • US CPI, Fed Beige Book Releases Likely to Pass with Little Fanfare

The Japanese Yen continued to recover as expected in Asian trade as regional stocks fell, boosting demand for the haven-linked currency. Regional stock exchanges fell, reinforcing upward pressure on the haven-linked currency. A variety of catalysts looks to be at work. First, as we discussed earlier in the week, the temporary lull in big-ticket event risk may be giving traders an opportunity to ponder on-coming headwinds from US austerity as the “debt ceiling” and “sequester” deadlines draw closer.

Second, the bar seems set extraordinarily high for next week’s BOJ rate decision after nine weeks of uninterrupted Yen selling. Investors have seemingly priced in a paradigm-shifting dovish turn in monetary policy. If Maasaki Shirakawa and company actually satisfy these lofty expectations, the impetus for speculation will still have been exhausted, leaving the Yen selloff without a driving catalyst. It appears as if the markets are beginning to catch on, sparking profit-taking on short-Yen exposure.On balance, S&P 500 index futures are pointing lower, suggesting overnight trends are likely to carry forward.

Another uneventful day on the European data front shifts the spotlight onward to December’s US CPI report. The headline inflation rate is expected to hold unchanged at 1.8 percent, offering little that can dislodge the standing outlook for Fed policy. The central bank will also release its Beige Book survey of regional economic conditions may offer a better read on overall growth trends in the world’s top economy but its implications going forward are limited at best for now while uncertainty continues to surround the amount of austerity due to hit the economy in the coming months.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Consumer Confidence (JAN)

0.6%

-

-4.1%

23:30

AUD

Westpac Consumer Confidence Index (JAN)

100.6

-

100

23:50

JPY

Machine Orders (MoM) (NOV)

3.9%

0.3%

2.6%

23:50

JPY

Machine Orders (YoY) (NOV)

0.3%

-7.3%

1.2%

23:50

JPY

Domestic CGPI (MoM) (DEC)

0.3%

0.2%

0.0%

23:50

JPY

Domestic CGPI (YoY) (DEC)

-0.6%

-0.7%

-0.9%

0:30

AUD

New Motor Vehicle Sales (MoM) (DEC)

2.2%

-

0.2% (R+)

0:30

AUD

New Motor Vehicle Sales (YoY) (DEC)

17.9%

-

9.8% (R+)

2:00

CNY

Actual FDI (YoY) (DEC)

-4.5%

-2.0%

-5.40%

2:00

NZD

Non Resident Bond Holdings (JAN)

64.0%

-

62.7%

5:00

JPY

Consumer Confidence (DEC)

39.2

-

39.4

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

EU 25 New Car Registrations (DEC)

-16.3% (A)

-10.3%

Low

8:15

CHF

Retail Sales (Real) (YoY) (NOV)

2.9%(A)

2.7%

Low

10:00

EUR

Euro-Zone CPI (MoM) (DEC)

0.4%(A)

-0.2%

Medium

10:00

EUR

Euro-Zone CPI (YoY) (DEC)

2.2% (A)

2.2%

Medium

10:00

EUR

Euro-Zone CPI - Core (YoY) (DEC)

1.5%(A)

1.4%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3248

1.3378

GBPUSD

1.5998

1.6099

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

  • COMMENT: Xenophobia rears its ugly head in Singapore once more 18 hours ago
    COMMENT: Xenophobia rears its ugly head in Singapore once more

    Kirsten Han is a Singaporean blogger, journalist and filmmaker. She is also involved in the We Believe in Second Chances campaign for the abolishment of the death penalty. A social media junkie, she tweets at @kixes. The views expressed are … Continue reading →

  • Driving a $900,000 Porsche 918 Spyder to the future 21 hours ago
    Driving a $900,000 Porsche 918 Spyder to the future

    It’s more than just its inherent speed, or the whooshing noise that fills the cabin like a school choir jamming with James Hetfield. It’s what it represents in an industry full of skeptics. It’s a portal into the future – a time capsule left by some mad scientist born decades too soon. It’s something that shouldn’t exist. And yet it does.

  • 919 reasons to love: Flickr photo of the day 22 hours ago
    919 reasons to love: Flickr photo of the day

    We've brought you the drive video of the $900,000 Porsche 918 Spyder -- an 887-hp hybrid supercar with two electric motors working in harmony with a big 4.6-liter V-8. But how about this? Porsche's hybrid Le Mans racer -- the 919 Hybrid, sent to us by Kevin Leech. Get on board with electrification, folks. Because it's taking over the world.