USD/JPY Fundamental Forecast – November 14, 2016

U.S. Dollar bulls took a breather on Friday, allowing the Japanese Yen to gain back a little of last week’s huge losses. U.S. Treasury markets were closed on Friday because of a bank holiday so yields remained stagnant. This move is expected to be short-lived, however, as investors expect yields to continue to rise this week as the markets prepare for the December rate hike by the Fed and the possibility of higher inflation due to Trump’s aggressive plan to rebuild America.

The USD/JPY closed at 106.615, down 0.178 or -0.17%.

Forecast

Expectations of higher inflation are expected to continue to drive up demand for the U.S. Dollar. This is because the higher Treasury yields are more attractive than the yields offered by the Japanese Government Bonds.

The key price investors are likely to go after early in the week is the July 21 top at 107.486. This is a possible trigger point for an acceleration to the upside with the next major targets, the psychological 110.000 level and the May 30 top at 111.444.

In economic news, Japanese Preliminary GDP is expected to come in unchanged at 0.2%. This report is not expected to have too much of an influence on the price action at this time. Most of the focus will remain on the strength of the U.S. Dollar and Treasury yields.

BOJ Governor Kuroda is also scheduled to speech. He may address last week’s rapid sell-off in the Japanese Yen. A weaker Yen may actually be good for the Japanese economy because it could help boost inflation so I don’t think Kuroda will have anything negative to say.

Japanese Revised Industrial Production is expected to come in unchanged.

There are no major reports from the U.S. on Monday.

Look for the USD/JPY to continue to find support as long as U.S. Treasurys and U.S. equity prices continue to rally. Watch for a possible acceleration to the upside if buyers take out 107.486 with conviction.