Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Japanese Yen Draws Safe Haven Share

Currencies / Japanese Yen Jul 17, 2010 - 02:00 AM GMT

By: Ashraf_Laidi

Currencies

Best Financial Markets Analysis ArticleAs long as US economic data shows fresh round of deterioration, and the Eurozone is able to supress event risk on the sovereign front, the Japanese yen shall cotinue to draw the lion's share of risk-aversion flows away from the USD. But let's first go over the USD's recent decline before further dissecting the yen flows.


The 7% decline in the USD's trade-weighted index from its June highs has evolved from stabilizing global equities to broadening weakness in the US data front. The resulting decline in US bond yields has accelerated the USD sell-off to the extent of eroding US yield differentials relative to EUR, GBP and JPY. The broad downgrade of the US growth outlook by the FOMC shuts the door on any remaining form of policy tightening this year, thereby, exacerbating the decline in yields. In fact, the minutes of the FOMC meeting allowed for renewed easing in if the outlook were to worsen appreciably.

The chart below shows the spread between German and US 10-year yields (GE minus US) has improved to -0.31%, the highest since October 2009. A decent Spanish bond auction and eroding liquidity concerns in the Eurozone have helped accelerate the euros rebound. Renewed declines in US new home sales, payrolls and consumer confidence are tipping the balance into a possible double dip recession. US 10-year yields have also fallen relative to their UK and Japanese counterparts, nearing their worst levels in 12 months.

EURUSD broke above $1.29 but may fail to close the week above the 100-DAY MA, which would have been the 1st positive cross this year. Euro remains propped with the potential of extending towards $1.3130. A close below $1.26 would be required next week to fuel hopes for a prompt USD rebound. Otherwise, $1.3130 is next in the cards.

EUR diverged from GBP as EURGBP broke above the key 0.84 preliminary resistance, eyeing 0.8490. I maintain my negative bias on EURGBP considering widespread sovereign questions in the Eurozone and the contrasting inflationary picture between the above-target 3.2% UK CPI and the Eurozones 1.4%.

Yen Does it Again In July 7th I wrote The combination of US earnings season with European stress tests will likely stand in the way of equities regaining their April highs, while the expiration of US jobless benefits and homebuyer credits could speed the way for the downside. Such a scenario paves the way for deteriorating risk trade, with the JPY most apt to assume the role of risk-aversion beneficiary. Many observers are loath to mull USDJPY below the mid 80s, citing opposition from Tokyo. But with the USD part of USDJPY equation remaining vulnerable to US data uncertainty and the JPY part gaining from the aforementioned red flags to global growth and risk appetite, the implications for sub 85 USDJPY are becoming increasingly suggestive. And with global bond yields caving in to disinflationary pressures and growth concerns, Japanese capital will turn away from yield appetite to safety appetite.

Today, US 10 yr yields drop below 3.00%. USDJPY knives below yesterdays 87.20 target, now eyeing 85.80 as the deteriorating stochastics call for extended JPY strength. The chart below shows the double bottom in the VIX may rebound towards 34-35, which case USDJPY will have a valid grounds for retesting the 84.80 lows.

My original analysis from October 2008 explained how USDJPY would continue to break to new lows as long as the case for a Fed tightening remained weak. With the June FOMC minutes showing the first economic in nearly a year, and bond yields under pressure, the door for a 2010 tightening has been firmly shut.

Dj-Vu from May 21st equities made a late session rally on news that Goldman Sachs would settle its lawsuit with the SEC, but news of Googles earning miss was not ignored by Asian markets. Nikkei-225 fell 2.9% on what is said to be fears of prolonged yen strength.

By Ashraf Laidi
AshrafLaidi.com

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Ashraf Laidi Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in