Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Japanese Yen Talking Points

USD/JPY is back under pressure following a slew of mixed data prints coming out of the U.S. economy, and the pair may continue to consolidate over the remainder of the week as the recent advance in the exchange rate fails to produce a test of the May-high (111.40).

Image of daily change for major currencies

USD/JPY Forecast: Failure to Test May-High to Fuel Larger Pullback

Image of daily change for USDJPY

USD/JPY gives back the rebound from earlier this week as the Philadelphia Fed Business Confidence survey slips to 19.9 from 34.4 in May to mark the lowest reading since 2016, while a separate report showed U.S. Continuing Jobless Claims climbing to 1723K in the week ending June 9 amid forecasts for a 1710K print.

Image of Fed Fund Futures

Even though the Federal Open Market Committee (FOMC) is widely anticipated to deliver another 25bp rate-hike in September, the reaction to the mixed data prints suggest the dollar remains vulnerable to near-term headwinds as signs of slowing activity curbs the central bank’s scope to adopt a more aggressive approach in normalizing monetary policy.

With that said, Chairman Jerome Powell and Co. may continue to project a longer-run Fed Funds rate of 2.75% to 3.00% as the committee pledges to ‘assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective,’ and market participants may put increased emphasis on the projections from Fed officials as the central bank pledges to phase out the forward guidance for monetary policy.

With that said, recent price action in USD/JPY raises the risk for a larger pullback as the pair sputters ahead of the May-high (111.40), and the Relative Strength Index (RSI) may exhibit a similar dynamic as the oscillator appears to be on course to threaten the bullish formation from earlier this year.

USD/JPY Daily Chart

Image of USDJPY daily chart
  • The near-term advance in USD/JPY appears to be unraveling following the failed attempt to test the 111.10 (61.8% expansion) to 111.60 (38.2% retracement) region, with the RSI at risk of flashing a bearish trigger if the oscillator fails to react to trendline support.
  • Break/close below the 109.40 (50% retracement) to 110.00 (78.6% expansion) region opens up the Fibonacci overlap around 108.30 (61.8% retracement) to 108.40 (100% expansion), with the next region of interest coming in around 106.70 (38.2% retracement) to 107.20 (61.8% retracement).

For more in-depth analysis, check out the Q2 Forecast for the Japanese Yen

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Image of DailyFX economic calendar

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.