USD/JPY Weekly Fundamental Analysis, November 23 – November 27, 2015 Forecast

Weekly Analysis and Recommendations:  The USD/JPY finished the week slightly better, but well off its high. At times, the price action mirrored the movement in the U.S. equity markets. The outside move on the chart suggests that technical factors as well as traditional fundamentals could play a role in this week’s price action.

On the bullish side, the Forex pair is being supported by strong expectations of a rate hike by the Fed in December. On the bearish side, this news is already priced in and investors are more concerned about future rate hikes by the central bank.

The minutes to the last Federal Reserve policy meeting showed an interest rate hike was still likely in December without offering more guidance, prompting some traders to book profits following a recent rally. Traders were also encouraged to lighten up on their long positions due to concerns about the timing of future interest rate hikes which the Fed deemed as “gradual”. 

The Japanese Yen was also supported last week after the Bank of Japan maintained the target annual increase in the monetary base unchained at 80 trillion Yen, as expected. The central bank also said it will continue QQE until stable 2 percent inflation is maintained.

The BoJ also noted that some data shows weak developments in inflation expectations. Nonetheless, policymakers asserted that easing is exerting intended effects even as CPI is expected to be about 0 percent for the time being.

Earlier in the week, Japan was shown to have slipped into a technical recession after GDP fell for a third consecutive quarter in the three months through September. The action in the Japanese equity markets reflected investor desire for more stimulus.

Trading conditions could be thin this week because of the U.S. bank holiday on Thursday. This opens up the market to a possible two-sided trade. Traders are likely to react to Tuesday’s U.S. Preliminary GDP and Wednesday’s Durable Goods report. The reaction is likely to be limited because investors don’t expect them to derail the impending Fed rate hike.

Empire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports.

Reports to Watch This Week: 

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