08.07.201912:53 Forex Analysis & Reviews: Yen traps opponents

The Japanese yen was marked by one of the worst daily peaks in 2019 after a real blockbuster hit the US labor market. Even the most ardent optimist of 105 Reuters experts could not predict that employment outside the agricultural sector in June will grow by 224 thousand. Investors immediately began to buy dollars and sell treasury bonds, which returned the yield of 10-year securities above the psychologically important mark of 2% and hit the safe haven assets. However, the rise of USD / JPY at the end of the first week of July is unlikely to force the bears to throw out the white flag.

According to a survey by Absolute Strategy Research, which was attended by over 200 financial managers which is managed by $ 4 trillion, the likelihood of a global recession in the next 12 months jumped to 45%. This is the highest figure since the beginning of the survey in 2014. The main problem is the policy of protection of Donald Trump, which has a negative impact on world trade and GDP. The German Sentix index of current economic conditions and expectations fell to its lowest level in nearly a decade, which indicates a high chance of a recession in Germany's economy-responsive trade wars. The main reason for increased sensitivity to a reduction in external demand is the high share of German exports in GDP. It is 47%, which is significantly higher than the US counterpart (12%).

Dynamics of European and German Sentix

According to the best forecaster for the EUR / JPY pair in the second quarter of Mizuho Bank, both the eurozone, led by Germany, and the euro are very weak and by the end of the year, the single European currency could drop by 4% to £ 117. Its fragile positions are masked against the background of a weaker US dollar, however, both the Fed and the ECB have much more opportunities to ease monetary policy than the Bank of Japan, which allows Mizuho Bank to be the bears in EUR / JPY and USD / JPY. The forecast for the latter by the end of 2019 is 103, and if the futures market turns out to be right, the Fed will resort to monetary expansion three times this year, then the dollar may even sink to £ 100.

The publication of the minutes of the June meetings of the FOMC and the Governing Council of the ECB, along with the speech of Jerome Powell in front of both houses of Congress, make the yen the most interesting currency of the second week of July. From the chairman of the Fed, investors are waiting for an explanation. The question now is, what is more important - data or financial markets? The latter are still confident in the reduction of the federal funds rate at the next meeting of the regulator. If the central bank does not adhere to this, then it risks to step on the December rake. At the end of 2018, after Powell announced that the current level of interest was still far from neutral, the S & P 500 collapsed.

Technically, on the daily USD / JPY chart, there is a transformation of the "Shark" pattern at 5-0. Breaking resistances to 108.95 (38.2% of the CD wave), 109.6 (50%) and 110.3 (61.8%) makes sense to use for the formation of short positions.

USD / JPY daily graph