This week will seem to be very tricky to trade for the Yen as this is the last week before Xmas. Some professional traders, hedge funds and other big boys of the game are going on holidays, others might already be on holidays. After last week’s FED rate hike, next up is the BOJ. We might see them leaving the rate as it is even though there are a lot of positive economic data that came out of Japan recently. Probably they might want to observe the effects of FED rate hike before making any drastic move. There is still some interesting news surrounding the US, Japan, Taiwan and China where China took the US’s underwater drone in possible protest of the incoming US President’s attitude towards it. Russian President V. Putin and Japan’s Prime Minister S. Abe have been in talks to possibly end a long post World War II rift over territorial dispute. This summit also brings big economic projects including but not all the ff: nuclear energy, oil and gas, exploration, chemicals, logistics etc. With the upcoming Olympic games being hosted by Japan, there is more money which is going to start flowing into Japan with regards to the infrastructure development and other related services. Japan has unseated China for the first time in almost two (2) years to be the largest holder of US treasury bonds. This means that Japan has given US money so that spending can be increased by the US. With the possible renewed US-Japan relations, US might be importing a lot from them even though Trump keeps insisting on US doing away with imports. In this global village, countries’ interests force diplomatic and trade relations because no one country can have everything they need for its people. The BOJ is also contemplating on introducing financial literacy to the Japanese people in order to encourage them to start investing in stocks and other assets. Most of the people prefer to keep their money in cash or as deposits which have an impact on money supply. It also plans to renew its website in order to be more accessible to non-financial professionals.
Still a Bear for almost the same reasons mentioned previously, but with the Yen starting to show some strength and the technicals starting to show signs of possible reversal, we just have to watch the space, look at the BOJ’s move and prepare for a possible change in the bias. What is also worrying is the possible absence or the weakness of the bulls in the all the Yen pairs. The bias will only change when everything has almost confirmed our suspicion e.g Policy statement, clear reversal patterns, clear resistance levels etc.
3. ECONOMIC INDICATORS
The following is economic data which came out of Japan this past week.
12/12/16: Core manufacturing orders (m/m), PPI (y/y), the tertiary industry activity (m/m) and the Preliminary machine tool orders were all up this past week as expected by 7.4%, 0.5%, 0.5% and 3.3% respectively.
14/12/16: Tankan Manufacturing Index was up as expected by 4 from 6 to 10 while Tankan Non-manufacturing Index remained the same at 18. Revised Industrial production (m/m) data went down by 0.1% to 0.0%. Even though this in another country but the announcement on FED Funds rate on Wednesday is a high impact news. This is what traders and investors around the world will be looking out for this coming week.
15/12/16: The Flash manufacturing PMI which is also called the Nikkei manufacturing PMI went up as expected by 0.6 to 51.9 which is where it was exactly four (4) months back on the 21 Aug. 2016. This means that the companies are starting to have a positive view of the Japanese economy.
Going to Xmas, we do not expect a lot of data to come out Japan this week except for the policy rate.
19/12/2016: Trade balance went up as expected 0.7Trillio Yens from 0.47T to 0.54T. This further rubber stamps the fact that there is more good economic data coming out of Japan.
20/12/2016: BOJ’s Monetary policy minutes, monetary policy statement and the BOJ’s policy rate, which might not change as stated above with possible reasons.
21/12/2016: All industries activity (m/m) expected to go down slightly.
23/12/2016: Bank holiday
4. COT REPORT ON JPY
The report still shows a serious increase in short positions for the past six (6) weeks, meaning that more people are selling the Yen. It shows a decline in long positions the prior week before the release date meaning that less people are buying the Yen. The net positions are below the water line indicating Yen bearishness although this might change in the next report considering the fact that Yen has started showing signs of being strong after the FED’s rate hike.
5. TECHNICAL SUMMARY
I am expecting NIKKEI to start making a pullback this week. It opened at 19 198.88 and might possibly cruise through 19 800.00 psyche level.
USD/JPY I’m happy to have seen this popular pair hitting the 118.660 highest price this past week. As indicated that the expectation was for it to break the 117.00 psyche level because of the FED funds rate announcement, which it did and surpassed it. The weekly target was reached as well. This week it opened at 117.960.
GBP/JPY I’m also happy to have seen this pair’s performance last week. As per my last week’s forecast the expectation was to cut through 147.000 and test the 148.000 psyche level, which it did and hit the highest price at 148.460. The weekly target was reached. This week it opened at 147.160.
EUR/JPY opened this week at 123.140. This pair might start showing signs of exhaustion as predicted last week with Low’s start showing. The weekly target was not reached again.
CAD/JPY opened this week at 88.390. Whilst monitoring the oil news as well as the recent opec deal, this pair was also expected to cut through 89.000 but failed slightly by reaching the highest of 88.920 this past week. The weekly target was also not reached.
NZD/JPY opened this week at 82.150. This pair was also expected sail over the 84.000 psyche level this past week. It also failed slightly by reaching the highest of 83.720, but its weekly target was reached nonetheless.
AUD/JPY: I’m also happy with this pair as it was expected to cut through the 87.000 psyche level this past week in the forecast. It did exactly that by reaching the highest price of 87.530. It opened this week at 85.860. The weekly target was reached at WR2.
CHF/JPY opened this week at 114.840. This pair reached its highest price at 115.380 last week and reached its weekly target at WM4.
Hopefully the charts are uploaded.