Forex Top Team

Will the Downtrend in USD/JPY and Cross Yen Continue? Expectations for a Decrease in the US-Japan Interest Rate Gap Persist as US Bond Yields Decline

In the overseas markets following the Christmas holiday, USD/JPY and cross yen pairs are declining, with the yen strengthening. US bond yields have significantly decreased, leading to expectations in the market of an early rate cut by the US Federal Reserve. Yesterday, both US and European stocks performed well. However, the belief that the interest rate gap between the US and Japan will narrow is pushing down cross yen pairs, and the forex market is lacking risk appetite-driven movements. Today, Chinese and Hong Kong stocks are being bought due to policy expectations, but yen-buying pressure remains strong.

In the upcoming overseas markets, the focus is likely to be on the movement of US bond yields and the expectation of a decrease in the US-Japan interest rate gap.

In this context, attention should be paid to a series of US economic indicators to be announced today. These include US Wholesale Inventories (preliminary) for November, US Initial Jobless Claims (December 17 – December 23), and the US Existing Home Sales Index (November). Next week, the US employment statistics will be released early in the new year. While today’s indicators are somewhat limited, it’s important to check the results of Initial Jobless Claims as a related indicator. The market expectation is around 210,000 claims, which is similar to the previous figure of 205,000.

Regarding speaking events, there are no scheduled speeches by major central bank officials this week. Other scheduled events include the release of the US Weekly Petroleum Inventory Statistics and the issuance of US 7-Year Treasury Notes (40 billion dollars).

 

A market with a prevalent trend of selling USD.

Harald Holzmann, Governor of the Austrian Central Bank, showed a hawkish stance consistent with the past, stating that it is premature to consider a rate cut at this time and that there is no guarantee of a rate cut in 2024. However, there seems to be a delayed reaction to his statements, resulting in a slight increase in EUR purchases. It’s worth noting that such moves based on statements can reverse quickly, so caution is advised. Following EUR purchases might be risky.

I’ll continue to focus on cryptocurrencies.