Daily Economic Commentary: Japan

[PipDiddy]

Despite the recent rebound in the global stock markets, the yen still made some notable gains against higher-yielding currencies in the last 24 hours. The yen, however, was unable to steal some pips from the safe haven dollar.

The only data released was the Bank of Japan’s Monetary Base. The report, which measures the total change in the total amount of yen in circulation and deposits held at the BOJ, showed an increase of 8.6%, much higher than the 6.2% the market had initially expected. Increasing money supply is usually considered bullish for the domestic currency, as it could lead to inflation in the future.

No tier 1 data scheduled for release from Japan today, so the yen will probably be at the mercy of events happening in other major economies. Pay special attention to the BOE and the ECB interest rate decisions as they could have an indirect but strong impact on the yen’s price action.

[PipDiddy]

When the high-yielding currencies start falling, you just know that the yen bulls will be busy taking advantage of it! USD/JPY slipped by 26 pips, while EUR/JPY and GBP/JPY sported huge spikes before capping the day at least 60 pips south of its open price. Booyah!

And to think that the Land of the Rising Sun didn’t even release any economic report! That’s right – it’s all thanks to Draghi, folks! Apparently, he set the bar pretty high last week, which had increased the probability of disappointing markets. And boy did he disappoint!

No data will be released from Japan again today, but investors are turning their focus on the NFP report in the U.S. coming up at 12:30 pm GMT. The data is seen to come in at 100,000 in July, but make sure you stick around in case there are any surprises!

[PipDiddy]

The yen wasn't able to tap its inner pip-ninja on Friday as risk appetite picked up. USD/JPY finished the week at 78.57 after starting the day at 78.21. Meanwhile, EUR/JPY was up 202 pips at 97.28 by the New York session close.

It looks like the lack of economic reports from Japan left the currency vulnerable to market sentiment. Unfortunately for the yen bulls, the much-anticipated NFP figure from the U.S. came in better than expected and spurred some risk taking in the markets.

Our forex calendar is once again blank for reports from the Land of the Rising Sun today which could mean that market sentiment would probably continue to dictate the yen's price action. Given that, be sure you're on your toes for news that could affect the market's overall mood.

[PipDiddy]

When it comes to the BOJ and its stimulus plans, no news is good news for the yen! Thanks to speculations on the BOJ’s decision, the yen dominated its major counterparts in yesterday’s trading with USD/JPY dropping by 27 pips and EUR/JPY slipping by 25 pips. What’s up with the BOJ?

As it turns out, market players are speculating that the BOJ would keep its interest rates and bond purchasing program steady this month instead of actively weakening the strong yen. As a result, the yen bulls had charged against the currency’s major counterparts.

Unfortunately, a lot of rumors can still go around until Thursday when the central bank actually releases its decision. Today Japan is printing its current account data as well as its bank lending numbers. Both reports are expected to come in a bit stronger than last month’s figures, but keep close tabs on the numbers in case there are any surprises.

[PipDiddy]

The Japanese yen was outpaced by its major rivals yesterday as USD/JPY closed 42 pips up from its 78.21 open price while EUR/JPY ended the day 2 pips shy of the 97.50 minor psychological level. Where could the yen be headed today?

Japanese data came in slightly better than expected yesterday as the current account surplus widened from 0.28 trillion JPY to 0.77 trillion JPY, higher than the consensus at 0.75 trillion JPY. Bank lending also showed an improvement for July as the figure climbed from 0.6% to 0.7% on a year-over-year basis.

Only the Japanese core machinery orders and the M2 money stock are set for release from Japan today, but these reports aren't likely to have a huge impact on the yen's price action. Better keep an eye out for other events and releases that could influence risk sentiment today!

[PipDiddy]

The saying “what goes up, must go down,” couldn’t have held truer for the USD/JPY yesterday. After the pair’s strong performance on Tuesday, it simply fell apart in the last 24 hours. From its day open price at 78.63, the pair was pressured lower to close the U.S. trading session at 78.46.

There were not much in terms of data yesterday, but the yen did get a big boost from risk sentiment. Apparently, the German bund auction didn’t perform as well as expected and triggered a bit of risk aversion. In addition, there was the news that the German party CDU was in opposition to the backing of more financial aid to Greece.

Today’s a big day for the yen as the Bank of Japan (BOJ) is scheduled to announce its decision on interest rates. The market widely expects the central bank to keep rates unchanged at 0.10% and hold off additional quantitative easing measures. This means that the accompanying statement will be extremely vital in determining where the yen will go next. Be sure to read Forex Gump’s BOJ interest rate decision analysis.

[PipDiddy]

The low-yielding yen let loose its “inner crazy” yesterday and moved wildly versus the safe haven dollar. The yen rallied slightly during the Asian and morning European trading session but it was unable to hold on to its gains and gave up all of the ground it gained – and then some – during the U.S. trading session. At the end of the day, the yen was down 14 pips.

The yen lost yesterday because of the possibility of further easing. The Bank of Japan (BOJ) didn’t make any changes to policy but the accompanying statement said that the central bank would "proceed with monetary easing in a continuous manner by steadily increasing the amount outstanding by its asset purchase programme." The prospect of the central bank flooding Japan’s economy with more money gave the yen bears an opportunity to sell the currency.

No red flags on Japan’s economic calendar today so don’t expect any major one directional moves today. In any case, still be careful with your trades. It is the end of the week, which means traders could start closing their trades in preparation for the weekend.

[PipDiddy]

Between the dollar, euro, and yen, the Japanese currency was the markets' top choice last Friday. It gained 33 pips against the Greenback while snatching 44 pips away from its European counterpart.

What's surprising is that the yen has managed to hold on to its gains despite the release of softer-than-expected prelim GDP data earlier today. The latest figures revealed that the economy only grew 0.3% in Q2 2012, which is just half the growth that most economists had predicted.

No red flags on the calendar this week. But we do have a couple of notable reports due later at 11:50 pm GMT. The most recent BOJ monetary policy meeting minutes are due and they could provide us with valuable insight as to what the central bank plans to do to boost the economy and keep the yen grounded. Also, the tertiary industry activity report is supposed to come out, and it's expected to print a growth of -0.3%, down from the previous month's 0.7%.

But until these reports come out, it looks like the yen will be trading according to the market's risk appetite. As I always say, when risk sentiment turns sour, expect the yen to show its power!

[PipDiddy]

Thanks to a downside surprise in Japan’s GDP data, the yen received a triple roundhouse kick against its counterparts yesterday. EUR/JPY climbed by 46 pips, while GBP/JPY also rose to 122.90. What has gotten the yen bears so giddy?

Can you believe that it’s partly because of the PBoC that the yen had weakened? Remember that China had just printed its disappointing trade numbers late last week. When Japan’s GDP also printed to the downside, it supported beliefs that growth in the Asian markets are slowing down. Apparently, it also increased speculations that the PBoC will soon intervene by launching more stimulus, which propped up high-yielding currencies against the low-yielding yen.

Meanwhile, the BOJ minutes released a couple of minutes ago revealed that the BOJ folks still aren’t ruling out any easing options. They also said that growth prospects are broadly unchanged, while both the CPI and the domestic corporate goods price index are expected to be in line with the April forecasts.

No other news reports are scheduled for release today, so keep your eyes peeled for any market-moving reports in the other major economies!

Good luck trading today, homies!

[PipDiddy]

With the BOJ monetary policy meeting minutes providing no surprises, yen bears were free to sell-off the Japanese currency again. This led to a 38-pip rally in both USD/JPY and EUR/JPY.

Since the BOJ minutes were published early in the day, the yen was left at the mercy of general market sentiment in the London and U.S. sessions. Unfortunately for yen bulls, the U.S. published a surprisingly upbeat retail sales report, which led traders to dump the yen in favor of the dollar.

Today, it looks like y'all will have to continue tracking market sentiment because Japan ain't got nothing on the economic calendar. I suggest y'all check out my daily economic commentary on the U.S. if you're looking for a potential catalyst on USD/JPY. Good luck and happy trading, fellas!