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USD/JPY Rate Forecast:  Hawkish FOMC Minutes Fails To Change Trend

USD/JPY Rate Forecast: Hawkish FOMC Minutes Fails To Change Trend

2018-04-11 20:03:00
Tyler Yell, CMT, Currency Strategist
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USD/JPY Rate Forecast Talking Points:

  • USD/JPY Price Forecast: USD/JPY remains in bearish stature below trendline and Ichimoku cloud
  • USD edged higher after FOMC minutes were marginally hawkish, still weakening to JPY
  • USD/JPY Rate Insight from IG UK: changes in retail sentiment warn of a possible reversal higher

The US Dollar had a lot going for it on Wednesday with a solid CPI reading that showed the highest reading in a year and a release of the Minutes of the FOMC March meeting that was read as marginally hawkish. However, USD/JPY continues to hold below a confluence of resistance points that tends to favor a bearish bias.

The Japanese Yen remained bid through a majority of the session against the US Dollar after President Trump used his favorite diplomatic medium, Twitter to warn Russia that a barrage of missiles is likely heading toward Syria.

FOMC Minutes Help US Dollar But Doesn’t Change USD/JPY Downtrend

On the surface, the FOMC minutes seemed to provide the dry powder needed to see USD/JPY trade toward session highs and hold the gains. However, the market merely pared previous session losses after FOMC minutes showed that the Fed sees an acceleration in inflation that has officials leaning toward a faster path of future rate hikes. The minutes also showed that confidence in the growth outlook was strengthening.

USD/JPY Rate Forecast Looks to Ichimoku for Downside Bias Below 107.095

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Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT

The thick Ichimoku cloud looks to be challenging resistance on the long-term downtrend in USD/JPY, which was reignited after breaking the cloud base in January.

Despite the mounting bearish technical evidence on USD/JPY, a close above the February 27 high at 107.68 could help trigger a short-covering rally.

The April opening range low at 105.65 aligns closely with the Tenkan-Sen (26-day midpoint) at 106.06 as key support. Should the price close below these levels, it would be difficult to argue that the trend is not continuing lower and could press towards the long-term Fibonacci target of 104.20.

Unlock our Q2 forecast to learn what will drive trends for the Japanese Yen and the US Dollar!

USD/JPY Insight from IG UK Client Positioning

USD/JPY Rate Forecast:  Hawkish FOMC Minutes Fails To Change Trend

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDJPY price trend may soon reverse higher despite the fact traders remain net-long.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

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