JPY Daily Updates

31 October 2017

The yen strengthened yesterday and remains strong this morning. As global bond yields fall, interest rate differentials are falling, thus causing the currency to strengthen. Given the Bank of Japan's ongoing 'yield curve control' program (whereby 10-year bond yields are maintained at 0% through the Bank's bond buying and selling activities), the currency is particularly sensitive to global interest rates. Today's Bank of Japan event was, as expected, a non-event. The Bank remains committed to its existing policies, given its belief that yen strength may hurt the economy. 

USD/JPY is currently trading just above 113.10. EUR/JPY remains week and is currently trading below 131.70. 

As expected, the BoJ meeting was a non-event as the Bank remains committed to its current policies. Retail sales numbers missed expectations (2.2% vs. 2.5% expected). Unemployment figures came within expectations (2.8%) while household spending was much weaker than expectations (-0.3% vs. 0.7% expected). On Wednesday, the BoJ will announce its rate decision and hold a press conference. Finally, on Thursday, we’ll get cross-border stock and bond investments. Last week saw low CPI figures miss expectations.

Updated 
Short term outlook
Bullish

Thanks to lower global bond yields, we are upgrading the Japanese yen to bullish. The currency no longer looks oversold, looking at technical indicators on the daily chart. 

Medium term outlook
Neutral

After rising on higher global bond yields, we are upgrading the yen to neutral. Looking at the yen on a weekly chart, the currency remains far from overbought or oversold levels looking at various technical indicators. Thus trading conditions remain normal.

Updated