USD/JPY Fundamental Daily Forecast – Price Action Suggests Lingering Doubts Over Brexit, Despite Deal

The Dollar/Yen is trading nearly flat on Thursday despite the announcement of a Brexit deal, which is leading to a slight increase in demand for risky assets. The price action could be suggesting investors are still skeptical about the Brexit deal since it still has to be approved by Parliament before the October 31 deadline.

At 12:09 GMT, the USD/JPY is trading 108.714, down 0.047 or -0.05%.

Furthermore, traders could also be expressing concerns over the U.S. economy and the strong possibility of a Federal Reserve rate cut at the end of October. The chances of a rate cut jumped on Wednesday following the release of a disappointing U.S. retail sales report.

Brexit Deal in Place, but Johnson Still Needs Parliament Approval

After holding steady for several days, gold prices retreated on Thursday after European Commission President Jean-Claude Juncker said Britain had clinched a Brexit deal with the European Union, just a few hours before the start of a summit of the bloc’s leaders in Brussels.

Johnson said in a tweet that the new deal, which replaces the one struck by his predecessor Theresa May, “takes back control.” Johnson also urged Parliament to “get Brexit done on Saturday” when lawmakers are next due to meet.

Daily Forecast

Today’s major report is the Philly Fed Manufacturing Index. It is expected to come in at 7.3, down from the previously reported 10.0.

Minor reports include Building Permits, and Industrial Production.

Weak U.S. economic data could drive up the chances of an October Fed rate cut. This news should drive Treasury yields lower, making the U.S. Dollar a less-attractive investment.

Basically, if today is clearly a “risk-on” day then we expect the USD/JPY to strengthen. “Risk-off” will put pressure on the Forex pair. The current price action suggests investors still aren’t sure about how to play the risk game. This is helping to generate the sideways performance.

The price action suggests investor doubt over the Brexit news. Perhaps they’re waiting for full approval.