Economic Events:  (GMT)

Jan. 30  23:00     KRW      South Korean Industrial                                             2.1%                      5.6%                     

                23:30     JPY         Unemployment Rate                                                 4.5%                      4.5%                     

                23:50     JPY        Industrial Production (MoM)                                      2.9%                      -2.7%                    

                 13:30     USD       Core PCE Price Index (MoM)                                  0.1%                      0.1%                     

                13:30     USD      Personal Spending (MoM)                                         0.2%                      0.1%                     

                13:30     USD      Employment Cost Index (QoQ)                                 0.4%                      0.3%                     

                14:45     USD       Chicago PMI                                                                 63.0                        62.5                       

                15:00     USD      CB Consumer Confidence                                         68.2                        64.5                       

Feb. 01 13:15     USD       ADP Nonfarm Employment Change                         190K                      325K                     

                15:00     USD       ISM Manufacturing Index                                            54.5                        53.9                       

Feb. 02 13:30     USD      Nonfarm Productivity (QoQ)                                         1.0%                      2.3%                     

                13:30     USD      Initial Jobless Claims                                                  373K                      377K                     

                13:30     USD      Unit Labor Costs (QoQ)                                               0.9%                      -2.5%                    

                13:30     USD       Continuing Jobless Claims                                       3565K                    3554K                   

                15:00     USD       Fed Chairman Bernanke Testifies                                                                                              

Feb. 03   00:15     USD      FOMC Member Fisher Speaks                                                                                                   

                13:30     USD      Average Hourly Earnings (MoM)                                 0.2%                      0.2%                     

                13:30     USD      Nonfarm Payrolls                                                          150K                      200K                     

                13:30     USD      Unemployment Rate                                                    8.5%                      8.5%                     

                13:30     USD       Private Nonfarm Payrolls                                            170K                      212K                     

                15:00     USD      ISM Non-Manufacturing Index                                   53.2                        52.6


The USD/JPY foreign currency exchange rate is the price of one U.S. dollar - the base currency - in terms of Japanese yen - the quote currency. For example, a bid/ask quote of 89.29/89.32 means that one U.S. dollar can be bought for 89.32 yen and one U.S. dollar can be sold at 89.29 yen.

If the U.S. dollar is expected to appreciate against the yen, then the above quote might rise to say, 89.73/89.76. The forex strategy in this case would be to buy USD/JPY. If, on the other hand, the U.S. dollar is expected to depreciate against the yen, then the above quote might fall to say, 88.68/88.71. The forex strategy in this case would be to sell USD/JPY.

In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.

Against the Japanese yen, whose central bank held rates steady at zero, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment. 

Daily range average : 80-90 pips Best time to trade: Asian Session (2400 GMT - 0900 GMT)  Some factors affecting the USD/JPY rate: 

  • The interest rate differential between the Bank of Japan(BoJ) and the Federal Reserve
  • Japanese government intervention to maintain their currency sends USD/JPY lower


USD/JPY Weekly Fundamental Analysis Jan. 30- Feb. 3, 2012, Forecast

Analysis and Recommendation:

The USD/JPY ended the week at 76.69 -0.76 (-0.98%)

The pair traded on weakness of the USD based on economic reports and the FOMC statement on interest.

The Good:

 US Durable Goods orders in Dec surprise to upside but how much was pulled forward from 2012 due to 12/31 expiration of full depreciation expensing?

 Jan US confidence rises to best since Feb '11

 Richmond and KC manufacturing survey's both rise

 The Bad:

Q4 US GDP rises 2.8%, a touch below expectations but nominal GDP gains just 3.2%, the weakest since Q3 '09. If deflator was in line with expectations, Real GDP would have been up just 1.3%. Real final sales up just .8% vs. 3.2% in Q3

 Initial Jobless Claims normalize at 377k after holiday distorted 356k last week

 Inflation expectations within UoM rise to 3.3%, the most since Sept and remains above the 20 yr avg of 3.0%. Expectations also rise to multi month highs in TIPS market

 New Home Sales remain weak, prices fall 12.8% y/o/y

 FOMC stretches out zero rates until late 2014, US$ resumes downward trend against everything. Fed destroying the price mechanism as if interest rates are artificially priced, what are assets really worth? If we don't know what assets are really worth, how can capital be efficiently allocated?

This week's movement has been in response to the weakness developed in the USD from the FOMC statements and continuing with the weak economic data from the US.

The Japanese unemployment report is due out Monday and might add to the weakness of the JPY, as it is expected to increase due to manufacturing weakness.

 Upcoming Sovereign Bond Sales Dates

Jan 30  10:10  Italy   BTP/CCTeu auction

Jan 30  10:10  Norway  Nok 4.0bn 5.0% May 2015 bond

Jan 30  11:00  Belgium  OLO Auction

Jan 30  12:00  Norway  Details bond auction on Feb 06

Jan 31  10:30  Belgium  Auctions 3 & 6M T-bills

Jan 31  15:30  UK  Details gilt auction on Feb 07

Feb 01  10:10  Sweden  Auctions T-bills

Feb 01  10:30  Germany  Eur 5.0bn 2.0% Jan 2022 Bund

Feb 01  10:30  Portugal  Eur 0.75-1.0bn 3M T-bill

Feb 01  10.30  UK  Auctions 5.0% 2025 conventional Gilt

Feb 01  15:30  Sweden  Details nominal bond auction on Feb 08

Feb 01  16:00  US

Announces details of 3Y Notes on Feb 07, 10Y Notes on Feb

08 & 30Y Bonds on Feb 09

Feb 02  09:50  France  OAT Auction

Feb 02  10.30  UK  Auctions 0.125% 2029 I/L Gil

USD/JPY Pivot Points (Time Frame: 1 Day)

Name S3 S2 S1 Pivot R1 R2 R3