The Japanese Yen took the forex world by storm as it rallied against all major currency counterparts, finishing the week at monthly highs versus the US Dollar and Euro. A busy economic calendar ahead and a build in FX volatility prices points to another big week for the Japanese currency and broader markets.
Price action reminded us that nothing can go up (or down) in a straight line as the USDJPY moved virtually tick-for-tick with the S&P in retracing some of their recent gains. The critical question becomes whether this is merely a correction within a much larger USDJPY and equity market bull market or the start of a larger Japanese Yen and ‘risk’ reversal.
We see several key factors that suggest the JPY may yet rally to fresh highs versus the Euro and US Dollar. Yet the coming week’s US Federal Open Market Committee (FOMC) interest rate decision and Japanese Consumer Price Index (CPI) Inflation data may set the tone for Japanese Yen moves through the foreseeable future.