USD/JPY Forecast: Will fear push it lower? A busy week awaits


  • USD/JPY has been unable to advance as Brexit and trade seem stuck.
  • A packed week including the Fed decision, US GDP, and the NFP promises fireworks.
  • Late October's daily chart is showing bulls are losing momentum.
  • The FX Poll is pointing to short-term strength and a downfall afterward.

After a week that saw both Brexit and trade talks hit bumps on the road, top US events are set to rock markets. It does not get more packed than having the first release of US GDP, the Fed decision, and Non-Farm Payrolls all at once. 

This week in USD/JPY: Politics are stuck again

The neverending Brexit saga has topped the headlines once again. Parliament thwarted Prime Minister Boris Johnson's first attempt at Brexit by practically forcing him to ask for an extension. The PM did succeed in passing the first hurdle of the Withdrawal Act Bill (WAB) but failed to receive approval for an expedited program motion – killing the chances of the UK leaving by the October 31 deadline. 

USD/JPY has been following GBP/USD. Brexit optimism weakened the safe-haven yen while the drag sent it back down. Brexit has remained a global issue. An extension means that the topic´s impact will be confined to sterling, with only minor influence on the yen.

Not only British MPs had issues reaching agreements – so did US and Chinese negotiators. The world's largest economies have kept the discussions under wraps, but comments from White House Advisor Larry Kudlow have revealed that little progress was made. Kudlow said that issues related to the first phase of the deal might spill into the second phase. That also weighed on market sentiment. 

US figures have been mixed as markets continue speculating about the Fed decision. Durable Goods Orders dropped by 1.1%, core orders by 0.3%, and non-defense ex-aircraft by 0.5% – all below expectations. On the other hand, New Home Sales remained upbeat with 701K annualized, and Markit's preliminary Purchasing Managers' Indexes for October continued showing expansion. 

US events: Fasten your seatbelts

It will be a week to remember on the US calendar – and it may confirm or disprove fears of a recession. On Tuesday, Consumer sentiment will provide new information about the shoppers – which push the economy forward. Super Wednesday features ADP's Non-Farm Payrolls, a hint for Friday's jobs report. It is instantly followed by the first read of Gross Domestic Product for the third quarter – which is set to show a slowdown.

The Fed concludes the day with a rate cut – but that is far from being guaranteed. High uncertainty may trigger elevated volatility. Last but least, Friday's post-Halloween jobs report could also spook markets.

For a full guide and everything you need to know, see Halloween Week: Guide to five critical US events that may spook markets about a recession

Here are the top US events as they appear on the forex calendar

US macro events October 28 November 1 2019

Japan: BOJ decides after the Fed

While the yen is mostly sensitive to global developments such as trade, Brexit, and geopolitics, Japan's economic calendar is packed in the upcoming week. 

The Tokyo region's Consumer Price Index figures for October are expected to show ongoing weak inflation –well below the 2% target. The figures feed into the Bank of Japan's rate decision early on Thursday.

Will the BOJ cut interest rates once again? Governor Haruhiko Kuroda and his colleagues have raised the option. A mix of weak CPI and another cut by the Fed on Wednesday may push the BOJ into action. 

It is essential to note that negative rates have been unable to help push inflation higher nor create growth. A reduction from -0.10% to -0.20% will hurt banks even more than it does now. However, the BOJ competes with other central banks and would dislike another appreciation of the yen. 

Here are the events lined up in Japan:

Japan macro economic events October 28 November 1

USD/JPY Technical Analysis

USD/JPY is holding in the range, and bulls continue commanding advantage over the bears. The trend in recent weeks has been to the upside, as the higher highs and higher lows show. The currency pair is trading above the 50-day and 100-day Simple Moving Averages but below the 200-day SMA. Momentum remains positive. 

Resistance awaits at 109, which capped it earlier in October. The 200-day SMA is another cap at 109.15, and it is closely followed by another line – 109.35, which was a swing high in early August. Further above, 109.95 was a peak in May, and the next lines to watch are 110.65 and 111.05. 

Initial support is at the former double-top of 108.50. It Support awaits at 108.20, which was a low point in late October and held USD/JPY earlier. 107.50 is where the 100-day SMA meets a support line from July. Lower, 107 was a cushion in September and capped the pair in August. Lower, 106.50 is October's low. 

USD JPY technical analysis October 28 November 1 2019

USD/JPY Sentiment

Top-tier US figures will likely extend fears of a slowdown – weighing on the USD/JPY. Even if the Fed refrains from cutting rates at this juncture, an open door for doing so in December may be enough to weigh on the greenback. Overall, there are good chances that the recovery will come to an end.

The FX Poll is experts are mildly bullish in the short term but foresee falls in the medium and long terms. The target for the short term is little changed while medium and long term objectives have been upgraded. Are bearish forecasters becoming more optimistic? 

USD JPY weekly FX Poll October 28 November 1 2019

Related Forecasts

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD: At risk of extending its slide

The greenback closed the week appreciating against most major rivals, although EUR/USD settled in the 1.1780 price zone, holding on to modest weekly gains. EUR/USD decline corrective on the broader view but could extend its slump in the shorter-term.

EUR/USD News

GBP/USD: Limited bearish potential

The GBP/USD pair finished the week with modest losses at 1.3050, giving up to the dollar’s demand at the end of the week. The Cable is trading above the 1.3000 level, which limits the bearish potential.

GBP/USD News

Gold: Acceptance above $2050 critical to revive the uptrend

Gold’s record-breaking rally could resume on a sustained move above $2050. RSI on 4H chart stays in the bullish territory, pointing to the upside. XAU bulls to buy the dips around $2010 in the week ahead?

Gold News

Bitcoin may extend the recovery once Gold resumes the rally

Gold retreated from the recent highs, but the sentiments are still bullish. Cryptocurrencies resumed the upside, some altcoins are demonstrating strong gains. ETH/BTC stopped the downside correction and settled at $0.03300.

Read more

WTI extends slide toward $41, on track to post weekly gains

Crude oil prices continued to fall on Friday and the barrel of West Texas Intermediate (WTI) touched a daily low of $41.05 before recovering modestly.

Oil News

Forex Majors

Cryptocurrencies

Signatures