USD/JPY Fundamental Daily Forecast -BOJ Minutes Show Some Members Were Considering Rate Hike

The Dollar/Yen fell to its lowest level since September 11 on Thursday fueled by dovish comments from the U.S. Treasury Secretary, but managed to close higher for the session after hawkish comments from President Trump fueled a massive rebound rally. The move was enough to form a potentially bullish closing price reversal bottom.

On Thursday, the USD/JPY settled at 109.397, up 0.186 or +0.17%.

The move in the Dollar/Yen was mostly about the dollar and little about the Yen. Dovish comments from Treasury Secretary Steven Mnuchin once again fueled a rapid sell-off in the dollar. On Wednesday, Mnuchin triggered a sharp break in the Greenback when he said that a weak dollar was good for U.S. trade. But when given the opportunity to clarify his comments at the World Economic Forum early Thursday, Mnuchin did not latch on to the strong U.S. dollar rhetoric used by past Treasury secretaries. This drove the USD/JPY into a multi-month low.

Mnuchin said during a CNBC-moderated panel that the dollar can fluctuate and he is not concerned by the current weakness, but “in the longer term” believes in the “strength of the dollar.”

Comments from U.S. President Donald Trump helped turn the dollar around and encouraged investors to sell the Yen with hawkish comments, saying he wanted a “strong dollar”, contradicting earlier comments made by Treasury Secretary Steven Mnuchin.

Trump told CNBC in an interview in Davos, Switzerland, that he ultimately wants the dollar to be strong.

Forecast

There has been no follow-through to the upside following yesterday’s potentially bullish closing price reversal bottom. Therefore, the chart pattern was not confirmed. This helped fuel a resumption of the selling pressure. If it persists and 108.494 is taken out then the reversal pattern will resume and the downtrend will continue.

Earlier in the session, Japan’s National Core CPI came in at 0.9%, matching the estimate. Tokyo Core CPI was 0.7%, below the 0.8% forecast. The SPPI came in at 0.8% as expected.

Minutes of the Bank of Japan’s December policy meeting showed some BOJ board members said the central bank should consider raising interest rates or slow purchases of risky assets if the economic recovery continued.

Most of the nine-member board agreed it was appropriate to maintain the BOJ’s current “powerful” monetary easing with inflation distant from its 2 percent target, the minutes showed.

But one member said the damage from prolonged monetary easing on commercial banks’ profits had been accumulating,” which meant the BOJ must carefully look at both the benefits and demerits of its policy, the minutes showed.

On Friday, investors have the opportunity to react to several key U.S. economic reports as well as any comments from the WEF in Davos, Switzerland.

U.S. Advance GDP is expected to come in at 3.0%, down slightly from the previously reported 3.2%.

Core Durable Goods Orders are expected to rise 0.5% versus -0.1% and Durable Goods Orders are expected to rise 0.9% versus a gain of 1.3%.

The Goods Trade Balance is expected to improve to -68.6 billion and Preliminary Wholesale Inventories are forecast at 0.4%.

Bank of Japan Governor Kuroda is also scheduled to speak at the WEF at 1400 GMT.

The plethora of economic activity today likely means we’re going to see more volatility in the USD/JPY.