Never miss a story from David Song

Subscribe to recieve 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 Daily FX 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 you 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 holds a narrow range following the lackluster U.S. Non-Farm Payrolls (NFP) report, but fresh comments from Federal Reserve officials may sway the near-term outlook for the dollar-yen exchange rate as the central bank appears to be on course to further normalize monetary policy over the coming months.

Image of daily change for major currencies

USD/JPY Outlook Hinges on Fed Chairman Powell Testimony

Image of daily change for USDJPY

Even though New York Fed President John Williams and Atlanta Fed President Raphael Bostic, both voting members on the 2018-FOMC, are scheduled to speak over the coming days, the semi-annual Humphrey-Hawkins testimony may sway the near-term outlook for USD/JPY as Chairman Jerome Powell is slated to appear in front of Congress.

Chairman Powell may continue to strike a hawkish tone as Fed officialsgenerally judged that, with the economy already very strong and inflation expected to run at 2 percent on a sustained basis over the medium term, it would likely be appropriate to continue gradually raising the target range for the federal funds rate to a setting that was at or somewhat above their estimates of its longer-run level by 2019 or 2020,’ and the central bank head may prepare U.S. lawmakers for a less accommodative stance as ‘incoming data suggested that GDP growth strengthened in the second quarter of this year.’

Image of Fed Fund Futures

In turn, indications of higher borrowing-costs may prop up USD/JPY as Fed Fund Futures highlight budding expectations for four rate-hikes in 2018, but a batch of cautious remarks may dampen the appeal of the dollar as Chairman Powell & Co. warn thatthe ‘uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.

USD/JPY Daily Chart

Image of USDJPY daily chart
  • Broader outlook for USD/JPY remains constructive as both price and the Relative Strength Index (RSI) track the bullish formations from earlier this year, but the pair may continue to face range-bound conditions following the failed attempt to teste the May-high (111.40).
  • Need a break/close above the Fibonacci overlap around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) to bring the topside targets back on the radar, with the next hurdle coming in around 112.40 (61.8% retracement) to 112.80 (38.2% expansion).
  • Failure to preserve the monthly opening range raises the risk for a move back towards 109.40 (50% retracement) to 110.00 (78.6% expansion), with near-term support coming in around 108.30 (61.8% retracement) to 108.40 (100% expansion), which sits just above the May-low (108.11).

For more in-depth analysis, check out the Q3 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.