The USD / JPY exchange rate remained greater than 144 Wednesday, while investors looked at the performance during the bond market. He was exchanged at 144.2, down compared to the summit of this month of 148.67. This article explores the prospects of the Japanese yen as fears of Bond remains.
The Japanese yen rises as the obligations give
Copy the link to the section
One of Macro’s best stories this week is the performance of the Japanese bond market.
This performance is mainly due to the structure of the bond market in Japan, an area where the Bank of Japan dominates. In the past decade, the bank has bought bonds worth billions of dollars per month thanks to its quantitative relaxation program.
The bank has now changed melody and increases interest rates, reduces its assessment and reducing its purchases. The question among investors is on those interested in these Japanese obligations.
Recent data show that investors’ demand has remained lukewarm. On May 20, a 40 -year -old auction responded to the lowest demand in more than a decade, while another had the lowest demand in ten months.
A probable solution for Japan will be to relax the transport trade which has existed in more than a decade. Japan could start selling its American obligations, as the federal reserve plans to reduce interest rates. This will then transfer some of these funds to the internal market.
Bond yields in Japan have jumped due to increasing concerns about the economy and the growing risks by default. Most recently, Prime Minister Shigeru Ishiba warned that the economy was faced with a worse situation than the Greece crisis a few years ago.
All these questions put the Bank of Japan (BOJ) in a difficult position because it fights against a high inflation rate. Recent data has shown that the consumer price index (IPC) was 3.6%, much higher than its target rate of 2.0%. The increase in interest rates will make the cost of borrowing in Japan much higher.
FOMC minutes and key data to come
Copy the link to the section
The USD / JPY exchange rate increased after the United States published solid consumer confidence data on Monday. According to the Conference Board, consumer confidence increased to 97 in May while Donald Trump showed an opening to conclude an agreement with other countries.
The next USD / JPY key catalyst will be the FOMC minute, which will be released on Wednesday. These minutes will provide more information on deliberations at the last monetary policy meeting.
However, their impact on the US dollar index will be limited because most investors have excluded rate reduction at the next meeting.
The USD / JPY pair will also react to American GDP data and personal consumer expenses (PCE) Thursday and Friday, respectively.
Like the Fed minutes, their impact on the US dollar will be limited because the Fed has already said that it would adopt an expected approach.
USD / JPY technical analysis
Copy the link to the section
The daily graph shows that the USD / JPY exchange rate remains under pressure this year. He moved below the exponential mobile averages of 50 days and 100 days (EMA), a sign that brings control.
The pair also formed a reversal head and shoulder pattern. This pattern includes a rounded top and a handle. It now forms the handle section.
Consequently, the most likely scenario is the place where the USD / JPY pair continues its downward trend, the initial target being the support at 139.85. A movement below this level will see the pair continue to fall in the coming days.
