There are reasons to believe that Japanese inflation will keep declining, especially given the slumping oil prices. As a result, the market will be expecting new stimulus measures from the Bank of Japan.
Japanese parliamentary elections will be an important topic during the next 2 weeks. Official campaigning will start on Tuesday, Dec. 2. For now Prime Minister’s Abe party is far ahead of its competitors. However, the uncertainty remains as 45% of the voters still haven’t made up their mind.
Japan’s economic calendar will be very light next week. The data that may influence the voters’ mood will come out only on Dec. 8 when the nation releases revised Q3 GDP. According to the initial estimate, Japanese economy contracted by 1.6% on the annual basis.
As a result, USD/JPY will be affected by the 2 sets of factors: on the one hand, the pair will be supported by the expectations of further stimulus from the Bank of Japan, but on the other hand it will be capped by the pre-election uncertainty and the fact that USD is overbought, though as we have recently seen, overbought/oversold technical analysis has become less relevant for this pair. On the H1 chart we may see a pennant which may push the price up to 119.85. Still, the possibility that he pair turns sideways is also high. Support is at 117.20 and 116.50.
Keep long-term longs if you have those. For the correct short-term entry levels follow the daily updates at FXBAZOOKA.com.
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