USD/JPY Fundamental Analysis: May 2, 2017
Investors on the USD/JPY pair chose to pay no mind to the relatively weak economic data coming from the US and instead shifted its focus on the recent increase in the demand for high-yield assets such as stocks, as well as an increase in the yields of US Treasuries. The USD/JPY pair closed down the previous session at 11.824 points after increasing by +0.30% or 0.335 points.
A drop in the US economy’s inflation and factory rates has put out any possible expectations for an interest rate hike this coming June from the Fed. Meanwhile, the PCE index dropped by 0.1 points last March, the index’s largest decrease ever since September 2001. In addition, the Core PCE Price Index increased by 1.6%, which is its smallest gain since July 2016. US Treasury yields surged yesterday after the US government managed to avoid a possible shutdown after clinching a deal for government funding. Equity prices also managed to climb higher, which also heightened the demand for high-risk assets and diminished the demand for the Japanese yen.
The USD/JPY pair could possibly find more support just as long as there is a demand for high-yield assets. However, the currency pair quickly became range-bound since investors are now bracing themselves for the Fed’s interest rate decision this coming Wednesday. As of the moment, the Federal Reserve is not expected to implement an interest rate hike this coming Wednesday, however the USD/JPY could possibly be influenced by the central bank’s statement tomorrow. Traders are advised to look for any clues with regards to the Fed’s next timing for its interest rate hike.