USD/JPY Forecast: Fed focus limits free movement

USD/JPY is trading in a narrow range as the last full week of the year commences.
Tension towards the all-important Fed decision limits movements.
The technical picture is decidedly mixed for the pair.

Yohay Elam FXStreet

USD/JPY is trading just below 113.50, not going anywhere fast. The light calendar on Monday no groundbreaking news on trade negotiations, and the anticipation towards the all-important Fed decision limit any movements.

On the trade front, markets were happy to hear that China will be buying US soybeans and that the world's second-largest economy is willing to change its controversial China 2025 program. However, the cheer did not last for too long, not in stocks nor USD/JPY. Over the weekend we learned that Chinese home prices are struggling. The data joins the more significant decelerations in industrial output and retail sales.

The most significant event of the week is Wednesday's all-important Fed decision. A rate hike is fully priced in, but expectations about the guidance for 2019 remain wide open. The latest forecast on rates by the Fed showed three increases next year. Recent dovish comments and unimpressive economic data caused some second thoughts about only one hike or even none at all. The latest substantial release raised the stakes once again: retail sales jumped in November.

In the US, the Empire State Manufacturing Index is due later on, followed by the NAHB Housing Market Index. Both are low-tier figures, but considerable surprises could move the needle for USD/JPY.

The pair is more likely to move on headlines regarding a potential government shutdown. US President Donald Trump remains adamant about receiving funding for a wall on the US-Mexican border while Democrats and most Republicans are against it.

USD/JPY tends to move with stocks and bonds. At the moment, US bonds are slightly lower while S&P futures are marginally higher.

All in all, the pair is looking for a new direction, and we may have to wait until the Fed decision to find out.

USD/JPY Technical Analysis

USD/JPY is trading within a narrow range. The Relative Strength Index on the four-hour chart is balanced at around 50 and Momentum is not showing any trend. The pair is hovering slightly above the 50 and 200 Simple Moving Averages, but this is unlikely indicative of any significant movement.

Resistance awaits at 113.70 which capped dollar/yen late last week. 114.05 capped it in late November. It is followed closely by 114.25 that was a swing high and by 114.55, the high point of the year.

Looking down, 113.15 provided support last week. Further down, 112.60 was a support line in early November. The most significant cushion is 112.20 which was a double-bottom earlier in the month.

More: USD/JPY strung out in the middle at 113.50

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.