USD/JPY Forecast December 16-20 – Dollar Punches Past 109

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Dollar/yen continues to show swings. The pair gained 0.7% last week, erasing the losses seen a week earlier. In the upcoming week, investors will be keeping an eye on the Bank of Japan monetary policy statement.

USD/JPY fundamental movers

Japan’s economy grew 0.4% in Q3, above the estimate of 0.2%. Manufacturing continues to struggle, as the Tankan Manufacturing Index slowed for a fourth straight quarter, falling to zero. The Tankan Non-Manufacturing Index dipped to 20, beating the estimate of 16 pts.

In the U.S., the Federal Reserve held rates at its policy meeting. However, the Fed’s message was decidedly dovish, as the dot plots showed that most FOMC members did not anticipate a rate hike before 2021. CPI gained 0.3% and Core CPI rose 0.2%, as both were within expectations. Retail sales dipped to 0.2%, shy of the estimate of 0.5%. Core retail sales slowed to 0.1%, missing the forecast of 0.4%. On Thursday, there were reports that the U.S. and China had reached a limited trade agreement, which could signal the beginning of the end of the nasty trade war which has dampened global growth.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

We start with resistance at 112.25.

111.62 has held in resistance since April. 110.62 is next.

109.73 is an immediate resistance line. 109.35 is close by.

108.70 has switched to support role after gains by USD/JPY this week. 108.10 is next.

107.30 (mentioned last week) switched to support in early October.

106.61 is next.

105.55 has held in support since late August. It is the final support level for now.

USD/JPY Daily Chart

USD/JPY Sentiment

I am bullish on USD/JPY

With the U.S. and China reaching a limited trade agreement, we could see a surge in risk appetite as global growth should improve. This could weigh on the safe-haven yen.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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