Japanese Yen Forecast: Turning The Corner In EUR/JPY, GBP/JPY, & USD/JPY Rates?

Japanese Data Misses, Yen Fades

With global equities declining for the first few weeks of September, the Japanese Yen was seen on favorable terms: it was the best performing major currency alongside the US Dollar. But in the last week of September, with Shinzo Abe stepping down as Japanese Prime Minister and global equities turning higher, the Yen fell out of favor. The near-term headwinds against the Japanese Yen appear to have strengthened in the past 24-hours amid two key developments, one local and one foreign.

First, the Tankan survey of large manufacturers – a BOJ-curated report that is a guidepost for policymakers – showed that the economy was rebounding at a slower than anticipated pace. Second, ongoing talks between Congressional Democrats and the Trump administration over another fiscal stimulus program have spurred risk-taking in financial markets, undercutting the Yen as a safe haven.


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Japanese Yen Forecast: Turning the Corner in EUR/JPY, GBP/JPY, & USD/JPY Rates?

Not much has changed in the recent day since our last EUR/JPY rate forecast update, insofar as the pair remains trapped within the range that we are observing. “EUR/JPY rates have recently found support in familiar territory, where the December 2019 highs were carved out after returning to the uptrend from the September 2012, September 2016, and January 2019 swing lows.”

That said, it was also noted that “clearing the Fibonacci retracement cluster zone around 123.23/36 would give greater confidence in a near-term rebound higher,” which has been achieved. Traders should keep an eye on the shift in momentum, which is evidenced by the turn higher by Slow Stochastics and the bullish crossover signal (albeit in bearish territory) in daily MACD. Moving back above 125.00 would perhaps be the clearest sign that the market has fully turned the corner.

IG Client Sentiment Index: EUR/JPY Rate Forecast (October 1, 2020) (Chart 2)

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