USD/JPY Weekly Fundamental Analysis, November 9 – November 13, 2015 Forecast

Weekly Analysis and Recommendations: 

The USD/JPY spiked higher on Friday to end the week at 123.144, up 2.4990, or 2.07%. The catalyst behind the move was the rise in U.S. Treasury yields fueled by the stronger-than expected U.S. Non-Farm Payrolls report.

The U.S. Non-Farm Payrolls report for October showed the addition of 271,000 jobs, soundly beating estimates of about 179,000. The unemployment rate ticked lower to 5 percent, marking full-employment. Average hourly earnings increased 9 cents or 0.4%, for an annualized increase of 2.5 percent. This put it slightly above the Fed’s mandated inflation target of 2.0 percent.

The odds for a December rate hike by the Fed jumped from 50% to 70% after the report.

This week is a relatively quiet week for economic activity out of Japan. There is a scheduled talk from the Bank of Japan’s newest board member Yutaka Harada, but he isn’t expected to impact the price action.

Recently, BoJ Governor Haruhiko Kuroda made a clear case for not changing monetary policy through the foreseeable future. However, if talk of dissension begins to build then look for the Japanese Yen to face selling pressure in anticipation of future quantitative easing.

With the jobs report out of the way, the focus will shift towards the consumer. Friday’s retail sales report will be most important. Core retail sales are expected to recover from the previous reports -0.3%. Traders expect it to rise 0.4%. Retail Sales are estimated to show a 0.3% gain versus the previously reported 0.1%. 

Softer-than-expected retail sales figures will not necessarily take a December rate cut off the board, but it could give longs an excuse to book profits after the sharp rise. 

Other important U.S. reports this week include JOLTS Job Openings on Thursday and Consumer Sentiment of Friday. 

Several Fed members are scheduled to speak next week, including William Dudley, James Bullard and Jeffrey Lacker, but the primary emphasis will be on Fed Chair Janet Yellen who is scheduled to give welcoming remarks at a Fed conference on Thursday. 

Forecast

After several months of consolidation, it finally looks like the USD/JPY is ready to resume its powerful uptrend. There may be periodic profit-taking breaks triggered by overbought technical conditions, but the Forex pair should remain on course to test 125.272 to 125.847 within the foreseeable future unless the U.S. economy suddenly takes an unexpected dip. 

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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