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JPY managed to gain momentum over USD recently while USD struggled with the worse-than-expected Non-Farm Employment Change report with a significant decrease in the process. USD is expected to regain momentum as it continues to sustain the optimistic approach while Japan struggles with the economic issues.
Recently, Bank of Japan's deputy governor Yamaguchi has stated that rising global uncertainties could push Japan to recession and force the BOJ to ramp up stimulus. As Japan is an export-oriented country, where the most revenue comes from exporting products globally, the global slowdown has already started to affect the economy. Today Japan's M2 Money Stock report was published with a slight increase to 2.4% as expected from the previous value of 2.3% and the Prelim Machine Tool Orders report is yet to be published with no expectation which previously was at -18.8%.
The BOJ is still holding its target towards 2% inflation rate whereas any changes in the global economy will require further easing and changes in the monetary policy and interest rate in the process.
On the other hand, the latest Average Hourly Earnings report showed an increase to 0.4% from the previous value of 0.1% and the Unemployment Rate had positive result of decreasing to 3.8% from the previous value of 4.0%. However, a significant decrease in the Non-Farm Employment change resulted in the price to fall to 20k from the previous figure of 311k. It caused a big blow to the USD gains. Today FED Chair Jerome Powell stated that the US was not looking forward to changing its interest rate soon as the global economy slowdown affected the economy. According to Powell, the rates are currently quite appropriate to sustain the economic momentum. As for the news from Europe, China and other global issues caused a certain economic slowdown which may affect the US economy as well, so without having proper confirmation of the situation, no step towards changing the interest rate or monetary policy is expected.
Today the US Retail Sales report is going to be published which is expected to increase to 0.0% from the previous value of -1.2% and the Core Retail Sales is expected to increase to 0.4% from the previous negative value of -1.8%. It can enhance activity of USD bulls in the market as an increase in sales indicates a better economic development. The upcoming CPI and PPI reports which are also expected to be quite positive may lead to further gains on the USD side.
As of the current scenario, USD is expected to dominate JPY further if the actual results of upcoming economic reports perform better or equal to expectation which might lead to further upward momentum in the future.
Now let us look at the technical view. The price is currently being held by the dynamic level of 20 EMA as support after a 50% bearish rejection daily candle off the same level was formed. As the dynamic level managed to carry the price higher earlier as well, as the price remains above 110.50 area it is expected to push higher towards 112.00 and above in the coming days.
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