USD/JPY Rate Forecast Talking Points:
- The ONE Thing: Fundamentals seem favorable for USD/JPY bulls as the Fed is expected to hike, and may discuss concerns their not tightening enough. Additionally, the Trump-Kim summit in Singapore has the ability to see JPY long positions unloaded on a peaceful conclusion while the Bank of Japan is expected to show the markets what monetary policy divergence looks like when compared to the Fed.
- Economic data includes US CPI, Central banks and other major geopolitical factors that may keep a bid under USD/JPY.
- Sentiment is currently showing retail traders are jumping into a long-JPY trade helping to favor further upside.
- USD/JPY Price Forecast:Price recently broke above the 9- and 26-day midpoint, which favors trend continuation as the price has traded above the daily Ichimoku cloud since late-April. Support sits at the late-May closing low of 108.62 with a move toward 111 favored.
- Trade wars have been in the news. If you’re not familiar with trade wars and their history,We've got you covered
This week has something for everyone and at the start, the Japanese Yen is weakening. The key events for FX traders will focus on the trio of central bank policy meetings that include the Federal Reserve, European Central Bank and Bank of Japan in successive order.
Any surprise from the BoJ would likely surround a shift on their Yield Curve Control program as the Bank of Japan looks to steepen the curve or a cut to their CPI forecasts.
The Fed is expected to hike rates and may communicate that they’re not being restrictive enough, the Bank of Japan is expected to further communicate a commitment to reaching inflation targets by staying accommodative. Outside of central bank meetings, the markets are looking to the summit between US President Trump and North Korean leader, Kim Jong Un.
The two assets likely to see any move off a positive outcome are the KOSPI and the Japanese Yen as a positive outcome would likely lead to an unwinding of any fear trades held through the meeting.
See what we see when looking at the Japanese Yen. Check out our new Q2 Yen Forecast here.
USDJPY Chart: The Price Held Above Ichimoku, Now Faces Resistance
Chart Source: IG UK Price Feed. Created by Tyler Yell, CMT
Technically Speaking on USD/JPY:
Resistance: 110.27, 111.40 – June opening range high, May 21 high
Support: 108.85-108.02 Ichimoku cloud top, late May low
New to Ichimoku? Click here for a free guide if you’d like to learn more
A break above the trendline drawn on the chart above would likely be the firmest evidence yet that the price correction that began on January 3, 2017 and lasted 14 months is potentially over.
The trendline connects the Jan 3 high to the October high when the DXY saw a corrective rally and the trendline acting as resistance sits ~100 pips above price now ahead of key event risk that should take the spot price to a range over 100 pips.
A breakout would turn focus to 112, the 61.8% extension from the low in May, and beyond toward 114.80, the October high and 100% extension of the March-May range from the late-May low. A break below the key support in the focus of the Ichimoku cloud and late-May low at 108.85/02 would indicate broader USD weakness and/ or JPY strength is on the near horizon.
More For Your Trading:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.
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---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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