USD/JPY Fundamental Daily Forecast – Bullish Tone, but Light Pre-Holiday Trade Keeping Lid on Prices

The Dollar/Yen is trading nearly flat on Wednesday despite another rise in U.S. Treasury yields and stronger demand for higher risk assets. These moves typically make the Japanese Yen a less-desirable investment because of the low-interest environment in Japan.

Earlier today, the Dollar/Yen took out the March 5 top at 112.137. This was a good news for the bulls because it represents a new high for the year. Buyers are having a little trouble with this area because it also represents a trigger-point for an acceleration to the upside with the next major target the December 13, 2018 main top at 113.710.

At 09:00 GMT, the USD/JPY is trading 112.005, down 0.011 or -0.01%.

Upbeat China Data Support Treasury Yields, Appetite for Risk

Helping to boost Treasury yields and demand for risky assets is the stronger-than-expected economic numbers from China. The data confirms the economy is bottoming out, mostly due to the stimulus from the Chinese economy.

The headline data shows that China’s economy grew 6.4 percent in the first quarter of 2019, beating analysts’ forecasts. Traders were pricing in a 6.3 percent increase year-on-year in the first three months of the year.

Other data showed Industrial Production grew 8.5%, more than the 5.6% forecast and Retail Sales jumped 8.7% versus an 8.3% forecast.

Japan’s Exports Fell in March

Japan’s exports shrank for a fourth straight month in March as weakness in global demand continues to weigh on the economy. The value of exports to the U.S. rose for a sixth month, by 4.4 percent, generating a bilateral surplus of 683.6 billion yen ($6.1 billion) in March, according to the finance in Tokyo. Sales to China slumped, driving a 2.4 percent drop in total exports.

Daily Forecast

Despite the somewhat bullish news for the USD/JPY, the price action is being muted by the light pre-holiday trade. However, if investors turn bullish later in the session then they are likely to use the former top at 112.137 as a springboard for a surge to the upside.

The daily chart indicates there is plenty of room to the upside to rally with the next major target coming in at 113.710. All it is going to take is further strength in the U.S. economy to drive prices into this level because the Japanese economy is going nowhere at this time.

If enough buyers fail to show up to drive the USD/JPY through 112.137 then we could be looking at a short-term pullback. This isn’t like to indicate a potential change in trend, but rather a reflection of the light pre-holiday trade.

Later in the U.S. today, investors will get the opportunity to react to reports on Trade Balance, Final Wholesale Inventories, and the Fed Beige Book.