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USD/JPY: U.S. economy will continue to outperform Japan

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The post-Fed hike in US Treasury rates and the easing of concerns around Evergrande in China have given USD/JPY a decidedly bullish bias.

In a statement on Friday, Fed Chairman Jerome Powell said most members of the Federal Open Market Committee (FOMC) agreed that conditions were met for a gradual tapering of bond purchases

USD/JPY

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The upcoming Japanese election and the new prime minister will produce another endless series, going back two decades, of government stimulus packages. The measure will not stimulate the economy, but will highlight Japan’s structural weaknesses and weigh on the yen.

The U.S. economy will continue to outperform Japan as the pandemic gradually declines as an inhibiting factor.

Japan’s retail trade (sales) for July is expected to be the focus, even though the consumer has been reluctant to join the recovery, but it is too long ago for this to have any impact on markets. Industrial production for August has more weight, but also little potential impact. Consequently, the Tankan report for the third quarter should confirm the weak state of Japanese manufacturing and non-manufacturing industries without providing any insight into the future. Consumer confidence is expected to remain low in September.

Data for the United States begins with August durable goods orders, which are essentially a replica of retail sales figures except for capital goods orders excluding defense and aviation spending, which are widely followed indicators of business investment. Manufacturing PMI buying managers’ index will provide insight into whether labor and material shortages and price inflation have been overcome. Dollars will benefit from a positive assessment.

The rally up until reaching the range at 110.50 lasted for a considerable time, but ended abruptly on Friday. The resistance at 111.00 is much less significant, and above this region only the brief panic highs of February and March 2020 await.

The anticipation of a US rate hike should push USD/JPY higher as long as the timing of Fed tapering doesn’t halt the US Treasury market.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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