Forex Today – 02/04: Yen Drops, Markets Eye BoJ Move

The Japanese Yen is weakening again, bringing the USD/JPY currency pair close to its recent high, a level at which markets expect the Bank of Japan will intervene.

1. The Japanese Yen has weakened further, sending the USD/JPY currency pair higher and close to retesting the record high it made very recently just below ¥152. Japanese financial officials will likely threaten intervention if ¥152 is tested again, but it seems likely that the price won’t fall very far in the meantime, giving traders potential opportunities to trade that range. Trend traders will still be interested on being long of the USD/JPY and in being short of the Japanese Yen in general. Analysts speculate that intervention by the Bank of Japan, if it comes, will likely drive the price down temporarily to about ¥147 / ¥147.50.
2. In the Forex market, the US Dollar is stronger after US ISM Manufacturing PMI data released yesterday came in stronger than expected. Since the Tokyo open, the Australian Dollar has been the strongest major currency, while the Swiss Franc has been the weakest.
3. Gold ended last week at a record high, and opened higher yesterday, before ending the day closing at a record high. Gold tends to be positively correlated with risk assets, many of which have been enjoying rallies to new highs. Trend traders will want to be long here.
4. Crude Oil is looking bullish, with both WTI and Brent hitting new 5-month high prices. The bullishness is boosted by improving Chinese economic data which raises the expectation of firmer Chinese demand for the commodity.
5. The minor commodity Cocoa continues to look very bullish. The commodity superfood has almost tripled in value over the last year alone, with many analysts suggesting supply side shortages are at least partly to blame for the meteoric rise. There is more and more demand for Cocoa every year as it is coveted as a key ingredient for chocolate but also as a superfood in its own right. Trend traders will be interested on the long side, although which such high volatility and sharp gains, it could come crashing down at any time, so trend traders must be careful to use a disciplined stop loss if going long. As well as Cocoa futures, there are Cocoa ETNs available which may be more suitable for retail traders and investors.
6. There will be releases later today of some high-impact data:

• German Preliminary CPI
• US JOLTS Job Openings