Jump to content

Japanese Yen Q3 2022 Forecast

Recommended Posts


Japanese Yen Q3 2022 Forecast: Will a Weak Yen Push the BoJ into Action?

Jul 3, 2022 | DailyFX
Daniel Dubrovsky, Strategist

The Fundamentals of the Japanese Yen (JPY) | Forex Academy

The Japanese Yen was hammered by markets in the second quarter. USD/JPY shot by the 2002 peak, touching its highest since 1998. A key driver of the Yen’s weakness has been the Bank of Japan’s policy divergence from its major peers. While central banks like the Fed and RBA gave surprise hikes, the BoJ remained persistently dovish, making life difficult for its currency. On the chart below, USD/JPY can be seen rising as US Treasury yields outpaced their Japanese equivalent. Could this change ahead?


Japanese Yen Q3 2022 Forecast: Will a Weak Yen Push the BoJ into Action?

Chart Created Using TradingView


A key reason why the BoJ reaffirmed its ultra-loose policy is low Japanese inflation. This has been slowly changing. Local CPI was 2.5% y/y in May, above the central bank’s 2% target. The BoJ has historically struggled to bring inflation in target. Some of this is likely due to reasons outside of its control, such as demographics. But even Japan is starting to feel the pinch of rising prices. The island-nation economy is the world’s 4th largest consumer of oil, which has become more expensive.

In the second-quarter Yen outlook, I tried to predict Japanese inflation based on crude oil and coal, also factoring in time. By removing the lag from CPI data, I could use recent energy price data to estimate where Japanese inflation could go in the coming months. The approach correctly estimated inflation breaching the Bank of Japan’s 2% target in Q2. In this article, I revisited the original multiple linear regression model and simplified it by taking out the impact of coal. I then built a second model that tries to consider the Yen’s devaluation. But more on the latter shortly.

The first model below has an R-squared score of 41%. In other words, only 41% of the variation in Japanese CPI is explained by crude oil and time. More to the point, it greatly underestimated the actual CPI in May (0.97% y/y expected versus 2.5% printed).


Japanese Yen Q3 2022 Forecast: Will a Weak Yen Push the BoJ into Action?

Source: Bloomberg, Chart Prepared by Daniel Dubrovsky


The second model below tries to predict Japanese CPI by also factoring in the Japanese Yen and holding constant G20 CPI. This is to see if a devalued currency could be an inflationary force for the island-nation economy. This model has a higher R-squared at 60%, meaning that 60% of the variation in Japanese CPI is explained by the variables. The higher accuracy of the model suggests the Yen could be a key factor in driving inflation. Without the Yen, the accuracy drops to 53%.

This model still underestimated actual CPI in May (1.8% seen versus 2.5% printed). It does see a slowdown in early Q3 before inflation rises back to target. It will remain to be seen if the BoJ will spring into action. A general rule of thumb for traders is to not fight central banks. As such, a dovish BoJ should still work against the Yen. But, a combination of inflation near target and rising concerns about JPY’s level could perhaps help stabilize the currency in the months ahead.


Japanese Yen Q3 2022 Forecast: Will a Weak Yen Push the BoJ into Action?

Source: Bloomberg, Chart Prepared by Daniel Dubrovsky

Link to comment

Japanese Yen Q3 2022 Technical Forecast: USD/JPY Targets 1998 High

Jul 2, 2022 | DailyFX
Thomas Westwater, Analyst

Yen reaches four-week high as commodity drop boosts haven demand

The Japanese Yen fell more than 10% versus the US Dollar in the second quarter as USD/JPY bulls pressed higher with nearly unrelenting vigor. USD/JPY broke its 2015 high in April when prices rallied 6.72%. The 2002 high then broke in June, putting prices in 1998 territory.


That year’s high of 147.65 marks the next major technical obstacle for USD/JPY. That is less than 8% from where prices were in late June. Given the recent pace of gains in the currency pair, that level may be tested in short order. A break higher would put prices at their highest in over 30 years. The 1990 high at 160.16 would then present bulls with their next key objective.


Japanese Yen Q3 2022 Technical Forecast: USD/JPY Targets 1998 High

Chart created with TradingView

Can prices sustain such a blistering rally? The Relative Strength Index (RSI) suggests that the answer is “yes.” RSI rose to a record high on the monthly timeframe, breaking above levels set in late 2014 and neutralizing the possibility for negative divergence (at least for now).

Looked at it another way however, it is noteworthy that the MACD oscillator is struggling to reach 2015 levels, despite still rising strongly. Here, the higher high in prices coincides with a lower high on the indicator, revealing negative divergence. That may be a bearish sign. Should prices fail to sustain above the 2002 high through the start of Q3, a rewind of the rapid rise over Q2 may be possible. If so, the 200-day Simple Moving Average could offer bears an enticing target.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 04/06/23 13:40
  • Posts

    • The inclusion of trading volume as a standard indicator in charting software for the past three decades is not without reason—it offers a vital advantage. Volume analysis grants traders valuable insights into the actions of market participants at different price levels. By focusing on volume, traders can react more effectively to price movements rather than attempting to predict the future direction of prices, as is often the case with many other technical indicators. 📍Key points about volume Here are the key points regarding the volume indicator commonly plotted on the X-axis in trading: 🔹Volume Indicator: The volume indicator calculates the total number of shares or contracts traded during a specified time period. It is usually displayed as a histogram or line chart, with time represented on the X-axis. 🔹Liquidity: Volume is a critical metric as it provides insights into the liquidity of a security. Higher volume generally indicates greater market participation and liquidity, making it easier to buy or sell the asset without significantly impacting its price. 🔹Confirmation: Volume can validate the authenticity of price movements. In an uptrend, increasing volume supports the bullish move, indicating strength and conviction among buyers. Conversely, declining volume during an uptrend may signal weakness or lack of interest. The same principles apply to downtrends. 🔹Breakouts and Reversals: Volume analysis is often employed to identify breakouts and potential trend reversals. A significant increase in volume during a breakout suggests a higher probability of a sustained move, while decreasing volume near a support or resistance level might indicate a potential reversal. 🔹Divergence: Volume can unveil discrepancies between price and market sentiment. For instance, if prices are rising while volume is decreasing, it could suggest that the rally is losing momentum and a reversal may be imminent. Similarly, increasing volume during a price decline might indicate selling pressure and the potential for further downside. 🔹Confirmation of Patterns: Volume can serve to confirm or invalidate chart patterns such as triangles, head and shoulders, or double tops/bottoms. Higher volume during pattern formations enhances their reliability, while low volume can cast doubt on the significance of the pattern. 🔹Watch for High Volume: Unusual spikes in volume can indicate significant market events, such as earnings releases, news announcements, or institutional buying/selling. Abnormal volume levels can lead to increased volatility and potentially present trading opportunities. 🔹Relative Volume: Comparing current volume to historical average volume helps assess the significance of current trading activity. Higher volume relative to the average may imply increased interest, while lower volume might suggest a lack of conviction or reduced market participation.
    • I don't know but it looks like a really awesome service Because I have come across all sorts of mixers in my work  
    • Charting the Markets: 2 June Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
  • Create New...