Written by: Naoto Ono, Gaitame.com Research Institute
table of contents
Date of writing: 12:00 on January 19, 2024
Aware of 150 yen, things could get rough depending on the reaction of the Bank of Japan and authorities
USD/JPY rose to the 148 yen level for the week of January 15th
In the US presidential nomination race, former President Trump won the Republican convention in Iowa, and expectations for a March interest rate cut in the US receded due to solid consumer trends, supporting the US dollar/yen. The US dollar/yen pair hit a new high of 148.525 yen, the highest since November 28 of last year. (Each rate level is as of the time of writing)
*Market trends are also explained on a program broadcast by Gaitame.com Research Institute’s TEAM Harrons.
Is the Japan-U.S. policy gap widening?
Next week’s USD/JPY price will be determined by the Bank of Japan’s monetary policy meeting and Governor Ueda’s press conference on the 23rd, as well as the U.S. quarterly real price for the October-December quarter on the 25th. It is likely that transactions will be made while checking preliminary gross domestic product (GDP) figures and December 26 personal consumption expenditure (PCE) statistics.
Regarding the Bank of Japan meeting, there are not many positive factors for policy revisions, such as the extent of the impact of the Noto Peninsula earthquake not being fully confirmed, and expectations for a reduction in the inflation outlook due to the recent peaking of prices. Therefore, the prevailing outlook is to leave monetary policy unchanged. The focus is on whether the debate over the certainty of achieving a virtuous cycle of wages and prices will deepen. Although it is Governor Ueda’s wish to lift negative interest rates and yield curve control (YCC), given that the Sakura report concludes that “uncertainty remains regarding the transfer of wage increases to service prices.” It cannot be said that sufficient data has been collected for policy revision. At the very least, it is difficult to imagine that the debate will pick up steam before the situation of the spring labor movement becomes clear, and I think the Bank of Japan meeting will be an event for the yen’s depreciation.
However, there is a need to be cautious about the USD/JPY level. Last year, on October 31st, the Bank of Japan effectively lifted the upper limit on long-term interest rates, but the day before that, the Nihon Keizai Shimbun published an observational article with the same content, and the US dollar/yen pair had fallen to 148.801. If the yen depreciates more unilaterally than the yen, it cannot be ruled out that it will lead to a debate over what the expectations for policy revisions in the past three months were. The Bank of Japan will maintain its position of not implementing monetary policy with specific exchange rates in mind, but there may be some mention of the yen’s depreciation. Furthermore, with regard to the US GDP, there is a renewed awareness that the economy is regaining its strength due to strong consumer spending, and the key point will be whether expectations for a March interest rate cut will recede. Basically, we are optimistic about the US dollar/yen pair, but we must remain cautious as speculation regarding monetary policy in Japan and the US is subject to change.
Pay attention to trends in USD/JPY, late 148 yen (chart analysis)
USD/JPY is in a state of three-way turnaround on the daily Ichimoku Kinko Hyo, and a 150-yen try is starting to be considered. However, as explained in the previous section, there is likely to be a corresponding increase in high price alert at levels above 148.801 yen, so caution should be taken not to rush to grab high prices at this level. I am thinking of buying on the downside after the price reaches the Ichimoku’s upper limit (146.433 yen) or the conversion line (145.968 yen, at the time of writing).
[USD/JPY chart daily]
Source: Gaitame.com “Gaikan Next Neo”
Expected range: USD/JPY: 145.500-150.500
Events for the week of 1/22:
1/22 (Monday) 24:00 US December Economic Leading Indicator Composite Index
1/23 (Tue) – United States US Presidential Election, New Hampshire Primary (Common, Democratic)
1/23 (Tue) – Japan Bank of Japan Monetary Policy Meeting, policy interest rate announcement after conclusion
1/23 (Tue) – Japan Bank of Japan Outlook Report
1/23 (Tue) 15:30 Japan Bank of Japan Governor Kazuo Ueda, regular press conference
1/24 (Water) 8:50 Japan’s December Trade Statistics
1/24 (Wed) 23:45 US January Manufacturing Purchasing Managers Index (PMI, preliminary figures)
1/24 (Wed) 23:45 US January Service Sector Purchasing Managers Index (PMI, preliminary figures)
1/24 (Wed) 23:45 United States January Purchasing Managers Index (PMI, preliminary figures)
1/25 (Thu) 8:50 Japan Status of foreign and domestic securities sales contracts, etc.
1/25 (Thu) 22:30 United States October-December quarter real gross domestic product (GDP, preliminary figures)
1/25 (Thu) 22:30 US December durable goods orders
1/25 (Thursday) 22:30 Number of new unemployment insurance applications in the United States
1/25 (Thu) 24:00 US December new home sales
1/26 (gold) – Japan’s ordinary parliament, convening
1/26 (Friday) 8:30 Japan January Tokyo Consumer Price Index (CPI, excluding fresh food)
1/26 (Friday) 8:50 Japan December Corporate Service Price Index
1/26 (Friday) 8:50 Japan Bank of Japan Monetary Policy Meeting Minutes
1/26(Gold) 22:30 US Personal Consumption Expenditure (PCE) in December
One word comment
It’s only January, but pollen is already flying around. I don’t have hay fever at the moment, but it can develop suddenly, so I spend the upcoming season nervously every year.
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2024-01-20 01:00:00
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