This would be the start a new series of weekly articles informing investors about the upcoming events on the economic calendar for the major currencies. In this article, I would bring my focus to the currency of the Japanese Yen (JPY). This article is meant to be a short and sharp article that would inform readers what events to look out for in the following week and why they are important.
I would categorize these events into 'Very Important', 'Important' and 'Marginal' and would include a brief analysis of the past results for the very important data. For a detailed analysis of the currency, please refer to my other articles as it is not the focus of this article. The very important events are likely to have a high impact on the currency, hence they are scrutinized. For the important events, the impact is lesser unless there is a surprise or the magnitude of change is much greater or lesser than expected. For the marginal events, it is not expected to move the currency much and a glance at it will do.
For the JPY, the first week of 2015 is a non event. There will be no economic calendar events at all. As traders, this will mean that the yen will likely to be pulled by the other dominant currency. For example, the direction of USD/JPY pair will likely be decided by the USD in the first week of 2015.
Overview of the Strength of Yen
We can see from the CurrencyShares Japanese Yen Trust ETF (NYSEARCA:FXY) chart below to gauge the strength of the JPY. The FXY tracks the performance of the JPY net of expenses of 0.41% and it is listed on the New York Stock Exchange in United States Dollars. The FXY is liquid with $84.83 million of market capitalization and last daily transaction volume of 84,238. This volume is reduced due to the Christmas and New Year holiday effect and volume is expected to improve by the second week of 2015.
The daily chart of the FXY shows that the JPY is very weak. This can be attributed to the success of Abenomics especially where the Bank of Japan has committed to increase its balance sheet by 80 Trillion yen. Hence except for the periodic retracement, a natural phenomenon when traders take profit, such as what happened in the first half of December 2014, I don't expect much strength from the JPY.
Although we can't say for sure when the retracement will take place, a major move is unlikely to take place next week when there are no economic factors affecting it. We can also see declining volume in the Christmas week and the thin market on the first week due to New Year would also prevent volatile movements that is typical of the JPY. We expect the market to return to normal by the second week of 2015.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.