Dollar/yen finally found its footing and began recovering. The USD enjoyed a potent mix of good data, positive comments from Fed officials and upcoming tax cuts. The yen did not manage to ride on fears from yet another North Korean missile test. Will it continue higher?
Update: The Senate approved the bill by 51 to 49.
USD/JPY fundamental movers
Everything in favor of the dollar
It began with the highest new home sales in a decade, continued with a similar record from consumer confidence and then we got GDP at 3.3% annualized for Q3: an upgrade and also a great number on its own.
Outgoing Fed Chair Janet Yellen was relatively upbeat about the economy, while incoming Chair Powell said that a rate hike in December is “coming together”. He also sent a message of continuation in his confirmation hearings.
The US Congress is advancing step by step and in a determined manner to pass significant tax cuts. While the average American will not enjoy it, nor will growth really rise, this is helpful to the US dollar. While there are doubts about the “trigger”, there is a good chance that it will pass.
North Korea tested yet another missile, this time with a potential capacity to reach the East Coast of the US. This worrying development did not rattle the yen for a change.
Full buildup to the NFP and some data from Japan
The first full week of December includes the ADP NFP, the ISM Non-Manufacturing PMI and they all lead to the Non-Farm Payrolls. The University of Michigan’s consumer confidence and factory orders are also worth mentioning. For a change, we will get a significant number from Japan: a revision of GDP.
See all the main events in the Forex Weekly Outlook
Key news updates for USD/JPYUpdates:
- Dec 8, 14:21: NFP beats: 228K, wages still stuck: 2.5% y/y – USD only slightly lower: It is the same story over and over again: the job market looks healthy but the salaries remain low. It’s...
- Dec 6, 13:55: NFP Preview: 3 scenarios for wages and the dollar: The last Non-Farm Payrolls report before the Fed makes its last decision for the is expected to show the numbers...
- Dec 6, 8:41: A December to remember for EUR/USD – MM #167: The year ends with a bang: two all-important rate decisions amid ongoing political developments, especially in the US. We focus...
- Dec 5, 16:00: ISM Non-Manufacturing PMI misses with 57.4 – USD temporarily slides: The services sector is slowing down according to the ISM Non-Manufacturing PMI: a score of 57.4 points is significantly lower...
- Dec 4, 8:48: USD likes tax reform, ignores Flynn – updates on 5 pairs: The US dollar enjoys a strong start to the week, rallying on the passage of the tax cuts and forgetting...
- Dec 4, 7:22: Trading a Trump impeachment with the US dollar in 3 phases: Donald Trump managed to withstand an amazing number of scandals. However, the latest issues refuse to move away. The recent Comey...
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
I am neutral on USD/JPY
Recent US economic data was just too good to ignore, and after the pair dropped it could stabilize around current levels. We may get some jitters from the Fed, so a full rally of the dollar is still unlikely.
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