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USD/JPY: the pair may continue recovery _04/07/2016

Technical analysis and trading recommendations-

As concerns in the background extinction Brexit, for the dynamics of the pair USD / JPY to the fore other fundamental factors such as the monetary policy of the central banks of Japan and the United States.

In Japan, there is a problem with the base inflation. According to almost all indicators, inflation in Japan is significantly below 2%, and the inflation expectations of companies and households in recent months continued to decline.

It is highly probable that the Bank of Japan will make further easing of monetary policy at the next meeting on 28-29 July. Otherwise, according to many economists, the pair USD / JPY may fall below 100, and the Nikkei to fall below 15,000, which will be a serious test for the financial market, as well as Japan's exporters, in view of the appreciation of the yen.

According to some projections, the Bank of Japan will increase the purchase of the assets of up to 1 trillion yen (9.7 billion US dollars) a year, along with the increase of purchases of government bonds and Japanese real estate investment trusts at 67%.

It is also likely that the Bank of Japan lowered its key interest rate to 0.3% from its current level of 0.1%.

The basis for active buying of the yen is mainly a demand for it as a safe haven against the backdrop of economic uncertainty in the world.

Softer forecast of further increase in US interest rates does not mean at all that the Fed refuses to monetary tightening. In the long-term US interest rates or not at all will be changed or will be raised. In Japan, on the contrary it is more likely that the Bank of Japan has strongly soften its monetary policy.

Thus, in the medium term, the pair USD / JPY will be more inclined to stabilization and growth, rather than to an even deeper fall.

Monday, 04 Jul, 2016 / 11:57

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