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USD/JPY marking its tag on the 118 handle

FXStreet (Guatemala) - USD/JPY is trading at 118.12, up 0.34% on the day, having posted a daily high at 118.18 and low at 117.67.

USD/JPY has been pierced but lacks conviction so far with only a light touch and a small gain made on the handle so far on the open of Tokyo, following suit of the trend from overnight when OPEC decided to stick with current quota of production. 118.20 still holds at this juncture. The real question that comes in is whether forward markets will price in the disinflationary outcome that lower price of oil will have globally into the curve which then weighs on the greenback due to the Feds decision to hold off from raising rates too soon.

But then on the flip side, we have already seen that Abenomics has so far not done any justice to the Japanese economy in respect of the governments inflation target in todays inflation data coming in softer than expected. Lower prices in oil, while perhaps great for oil importers and the local household economy, it does little to fend of the bears in the Yen from here. However, it would be wrong to not to keep an open mind on oil prices for 2015 and one decision from OPEC this time around does not guarantee lower oil for the whole of next year.

Markets will likely now start to turn towards the snap election coming up mid Dec in Japan and the risks there are for a potentially stronger Yen in the run up and/or volatility within a wide range while should the Abe camp be successful in the elections, this will support local equities on the Abenomics and the Yen could be on track to appease the USD/JPY bulls for the sighted 120 mark and beyond.

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