USD/JPY extends the fall – Forecast Nov. 27 – Dec. 1 2017

Dollar/yen  extended its falls within the very wide range, reaching levels last seen in September. The driver is the dollar, which was downed by the Fed’s meeting minutes. And yet again, what cannot break higher probably must come down, way down.

USD/JPY  fundamental  movers

Fed skeptical about inflation

Yellen gave us an early warning with her statement that low inflation is probably not transitory. And then came the meeting minutes which turned it into a one-two punch. A few members “oppose” a rate hike and the majority are concerned. This does not seem enough to stop the Fed from hiking in December but lowers the chances three rate hikes in 2018.

US data was not that supportive either: headline durable goods orders and some of the core measures disappointed.

Congress was on break and the only political news was actually encouraging for the greenback: Alaska Senator Lisa Murkowski will support the tax bill. This was not enough for the dollar.

Politics are back, an update on GDP and a first hint for the NFP

The action returns as we enter the last month of the year. After the Thanksgiving holiday, Republicans will try to hammer out a deal on tax cuts that markets are waiting for. In addition, we will get an update on Q3 GDP and also the ISM Manufacturing PMI, a first hint for the NFP. The Fed’s favorite inflation measure, the core PCE, will also be published, but we already learned about the Fed’s worries on the topic of inflation.  

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

USD/JPY Technical Analysis

115.35 is an old line that served as support when the pair traded on higher ground. 114.50 is the cycle high last seen in early July. The pair got close to that level.

113.50 was a temporary line of resistance on the way up in July. 113.70 was a separator of ranges in June.

112.20 used to be important in the past. It is closely followed by 111.70, which provided support back in October. The round level of 111 worked as a cushion to the pair in November.

Looking down, 110.70 was a separator of ranges in June and remains important.  109.60 was a gap  line in late April, a gap that was never closed.

In June, the pair found support several times at 109.10 and this also works as support.  Further below, the cycle low of 108.10 is of high importance.

USD/JPY  Daily Chart

USD/JPY Sentiment

I remain bearish on USD/JPY

The Fed is catching up with reality and dollar/yen provides the best reaction. In addition, we could have a nasty surprise from Congress and also US yields are not that helpful.

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