The USD/JPY Currency Pair Kicks Off The Week With Low Trading Volume
The USD/JPY remained in a tight range on Monday due to low volume despite kicking off Monday’s session at a slightly higher level.
The light trading volume in the USD/JPY was likely due to the fact that the Japanese markets were closed due to a holiday, thus the low trading volume in the U.S. However, that is expected to change with the release of key US market data by the US Federal Reserve regarding monetary policy decisions and interest rates. This data was scheduled to be released on Wednesday while data on the US Non-Farm Payrolls report will be released on Friday.
Analysts expect price action to be influenced by the currently high-risk appetite as well as Treasury yields. The economic reports are expected to be the main driving force influencing price action. The reports are expected to have a significant effect on the USD/JPY especially since the government withheld the data release a month ago and that is why there will be two concurrent releases.
Market experts anticipate a 0.1% Core PCE Price Index for March and a 0.2%Core PCE Price Index for February. They also expect a 0.2%February Personal Spending and a 0.7%March Personal Spending. They also expect a slight 0.4% increase in personal income. A previous report released about a week ago revealed that the USD/JPY will likely be subjected to more pressure due to decelerating inflation and growth. The upcoming announcements might keep the currency pair in a tight range.
According to Westpac analysts, the Federal funds rate will hold its levels in the 2.25-2.50% range but only for a limited amount of time before shifting towards a rate cut in the second half of 2019. They also expect the market to be characterized by some concerns over the 1.6% March drop in the Federal Reserve’s preferred inflation measure.
The divergent relationship between economic growth in the U.S. and the rest of the world
Economic growth in the U.S. seems to be diverging compared to the economic performance in the rest of the world and this has influenced positive flows in the U.S. assets that are based on the dollar. Meanwhile, analysts also expect the Federal Reserve to maintain the current interest rates in order to allow more developments to achieve their growth targets in their domestic markets. This explains the higher US stock prices and the Japanese Yen’s softer performance.
Despite the strong US market and dollar performance, last week’s GPD showed little promise due to overbought conditions which might pull back the dollar. The currency might be thrown off its current levels by this week’s upcoming data. Also, forex traders might heavily influence the direction of the USD/JPY upon the announcements because they thrive on volatility and thus the upcoming data represents noteworthy opportunities.
The USD/JPY demonstrated a strong performance last month as the dollar gained alongside gains seen in the stock market amid the geopolitical issues. China and the U.S. had been locked in a trade war for some time but the two countries held talks last month that involved trade deal negotiations,