European Risk Aversion Could Push Yen Higher $USDJPY

Today was an important day in Japanese fundamentals.

Bank of Japan (BOJ) head Mr. Shirakawa gave his final press conference. Today marked the early end of his tenure along with his two other deputies. His five-year term was supposed to end on April 8, but he decided to make way for Shinzo Abe’s guy, Haruhiko Kuroda. Mr. Shirakawa told parliament that risk appetite has helped contribute to the yen’s weakness.

CHANGING OF THE GUARD
Mr. Kuroda and his two deputies, Kikuo Iwata and Hiroshi Nakaso will take office on Wednesday. The ball is now in Shinzo Abe’s court.

DEFLATION QUESTION
Can his BOJ dream team push forward his agenda unlimited easing to fight deflation?

If history is a sign for anything, the answer should be an easy no.

RISK AVERSION
This time it is different, but trading the weaker yen could get ugly. Risk aversion from Europe could help contribute to a risk off environment that could help the yen move higher. The new BOJ leadership will need to pass their unlimited easing plans through parliament and that should face severe headwinds.

MARKET POSITION
Currently the markets are not heavily positioned long dollar/yen (USD/JPY) as they were the other trading week. With the economic outlook remaining strong for the U.S. economic situation, traders could look for some limited downside until it becomes time for the BOJ to act.

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

Posted in Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.