USD/JPY Fundamental Daily Forecast – Looking for Light Volume, Volatility Due to Japanese Bank Holiday

The Dollar/Yen is trading slightly higher on Monday, but volume is below average and the range is tight. The Japanese markets are closed which explains the light volume. U.S. traders face a mountain of economic data later today and ahead of Wednesday’s U.S. Federal Reserve interest rate and monetary policy decisions and Friday’s U.S. Non-Farm Payrolls report.

At 06:39 GMT, the USD/JPY is trading 111.637, up 0.062 or +0.05%.

To recap last week’s key event in Japan, the Bank of Japan pledged to keep its policy ultra-loose easy for at least another year, an effort to dispel talk it was wavering in its commitment.

The Dollar/Yen rallied last week, which some traders said was mainly because speculators chose to cut short positions ahead of this week’s expended Japanese holiday. Japan’s unprecedented 10-day holiday to celebrate Crown Prince Naruhito’s enthronement is expected to give the sluggish economy at least a short-term boost, according to Reuters.

Another reason for last week’s weakness in the Dollar/Yen was a decline in U.S. Treasury yields, which made the U.S. Dollar a less-attractive investment. U.S. government debt yields fell Friday even though the U.S. government said economic activity rose more than expected during the first few months of 2019.

Daily Forecast

Treasury yields and appetite for risk will continue to drive the price action. The catalyst behind the price action will be a series of economic reports.

It may confusing to some, but there will be 2 simultaneous releases after the government skipped the data release last month.

The February Core PCE Price Index is expected to come in at 0.2% and the March Core PCE Price index is expected to come in at 0.1%.

February Personal Spending is expected to have risen 0.2% and March Personal Spending is expected to post a 0.7% reading. Personal Income is expected to have risen 0.4%.

As we saw last week, any report that shows slowing inflation or growth is likely to pressure the USD/JPY. However, low volume and volatility due to the holiday in Japan and the Fed announcements on Wednesday could hold prices in a tight range.