Japanese Yen Outlook: USD/JPY Remains Under Pressure

The Bank of Japan released key economic data on Thursday morning, highlighting the ongoing rebound across the domestic manufacturing sector. While the Tankan Large Manufacturing Index and Outlook reports both posted significant increases over their Q1 readings, they fell short of market estimates. The Tankan Large Manufacturers Index produced a reading of 14 for Q2, against a consensus estimate of 15. The Tankan Large Manufacturers Outlook posted a larger miss, coming in at 13 vs. an expected reading of 18. Despite missing expectations, the readings reflect significant improvements from the prior readings in Q1. Despite a strong capex reading from manufacturers, markets may gyrate as they process this mixed bag of results along with the state of the Japanese recovery.

Despite a robust global economic recovery from the pandemic, the Japanese economy continues to struggle in relation to its developed peers. Private sector activity declined in June as the country deals with rising cases ahead of this summer’s Olympic Games. While virus-related restrictions have eased, fears remain that the summer games may spark a resurgence in COVID cases.

With just 11.5% of Japan’s population vaccinated, serious threats remain for the Japanese economy. The recovery in Japan also differs from the rest of the world – ultra-loose monetary policy is here to stay. Monetary stimulus will not be withdrawn unlike in other G10 economies, and deflationary pressures are likely to remain prevalent in a post-COVID Japan.


Bitcoin falls by 4% to near $33,000

The technicals dictate that Bitcoin is very much trapped between $30,000 and $40,000 right now and unless we see some push beyond those extremes, it is going to be tough to interpret any of the volatile moves in between.

Today is yet another day as the bounce earlier this week fizzles completely in a 4% drop towards $33,000 currently. There is some minor support closer to $32,000 but the important psychological level is that $30,000 level to the downside.

It is but anyone’s guess which side of this range price will break but when it does come, expect a violent and sharp move to follow and the trade is to go with it – if one has the appetite to embrace the volatility in cryptos that is.

Bitcoin Chart

Cable drops below 1.3800 on the session.

The pound not getting any love as BOE governor Bailey plays down persistent inflation pressures.

Cable got a decent bounce off 1.3800 yesterday amid dollar strength, moving back up to 1.3830 levels, but that is quickly fading at the moment in a drop to 1.3794.

While the greenback’s solid form this week is in part aiding the drop, the pound didn’t get much help from Bailey brushing aside inflation pressures as temporary here. He also added that the BOE should not “overreact” to growth and inflation conditions for now.

Not quite what you’d want to hear if you’re expecting a formal transition to tapering.

But as mentioned in the earlier post, the Fed has made it easy for everyone else so it isn’t hard to see why Bailey wouldn’t take advantage of that when he can.

In any case, the technicals may be more important for cable at this stage as price flirts with a potential drop below 1.3800. There isn’t much support beyond the figure level through to the double-bottom on 24-25 March and 9-12 April near 1.3670.

The daily close will be pivotal but just be wary of tomorrow’s payrolls as well.


Risk Warning:

Trading leveraged derivative products such as Foreign Exchange (Forex) and Contracts for Difference (CFDs) carries a high level of risk to your capital.

These derivative products, many of which are leveraged, may not be appropriate for all investors. The effect of leverage is that both gains and losses are magnified. The prices of leveraged derivative products may change to your disadvantage very quickly, it is possible for you to lose more than your invested capital and you may be required to make further payments.

Before deciding to invest in any financial product, you should carefully consider your investment objectives, trading knowledge and experience and affordability. You should only trade in Forex and CFDs if you have sufficient knowledge and experience of the risks involved in trading such products and if you are dealing with money that you can afford to lose. You should seek independent professional financial advice if you do not understand the risks involved.