USD/JPY

USD/JPY Fundamental Daily Forecast – Early Risk-On Trading Helping to Underpin Dollar/Yen

A recovery in the U.S. equity markets during the pre-market session is lending support to the Dollar/Yen on Thursday, shortly before the U.S. opening. The move is being helped by increased demand for risk which is encouraging those who bought the Yen as a safe-haven asset to square their positions.

At 1010 GMT, the USD/JPY is trading 112.310, up 0.060 or +0.06%.

Traders are also reducing safe-haven purchases of Treasurys which is helping to drive yields higher. This is also helping to make the U.S. Dollar a more attractive investment.

The USD/JPY is currently trading between a bottom at 111.622 and a top at 112.884. Trader reaction to these levels will determine the near-term direction of the Forex pair.

A move through 111.622 will reaffirm the downtrend on the daily chart. A move through 112.884 will change the main trend to up according to the daily swing chart.

Forecast

While stock market direction and volatility will likely dictate the direction of the USD/JPY on Thursday, there is an important economic report that could influence the price action.

Core Durable Goods Orders are expected to show a 0.5% increase, up from 0.0%. Durable Goods Orders are expected to come in down 1.3%, well-below last month’s 4.4% reading.

The Goods Trade Balance is expected to come in better at -74.9 billion, an improvement from -75.5 billion. Preliminary Wholesale Inventories are expected to rise 0.5%. Pending Home Sales are forecast at -0.1%.

Weekly Unemployment Claims are expected to rise slightly from 210K to 214K.

FOMC Members Clarida and Mester are also scheduled to speak.

It’s hard to predict a direction today since the price action is being driven by the stock market. The longer-term picture is bullish for the Dollar/Yen because of the divergence of the hawkish U.S. Federal Reserve and the dovish Bank of Japan. This is not likely to change unless the Fed decides to change policy due to political pressures, a weakening economy or extremely volatile conditions in the stock market.

While the long-term outlook may be bullish, there should be a few bumps in the road for longer-term trend traders due to periodic flight to safety buying.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.