USD/JPY Fundamental Daily Forecast – Safe-Haven Yen Buying Overrides Dovish BOJ Minutes

The Dollar/Yen is under pressure for a fourth straight session on Wednesday as investors continue to take protection against a further decline in U.S. equity markets ahead of the start of another round of trade talks between the United States and China. Traders are nervous about the outcome of the discussions, but I wouldn’t call it a panic situation.

At 08:15 GMT, the USD/JPY is trading 110.164, down 0.082 or -0.08%.

The initial selling pressure of this four day break was triggered by last Friday’s mixed U.S. economic data, which may have put a Fed rate cut later in the year back on the table after the Fed calmed investor nerves over that matter on May 1.

The real push to the downside started early Monday after President Trump’s week-end threat of additional tariffs on Chinese imports. Although there was speculation that China would cancel the upcoming meeting, they agreed to attend.

The current price action suggests that the odds of the U.S. and China reaching a deal at the end of the week are low. But they can easily move to 50/50 or higher as long as both sides remain at the negotiation table.

So far the selling pressure has been orderly. If the move continues then look for a test of 109.710. If this price fails then look for an acceleration to the downside with the next major target a retracement zone at 108.793 to 107.940. A test of this area could bring back the buyers.

Other News

The Bank of Japan monetary policy minutes showed policymakers remained divided on how quickly to ramp up stimulus to hit their elusive goal. However, the slowing global demand clouded the outlook for the export-reliant economy.

Most of the nine-member board saw no immediate need to expand an already massive stimulus program, however, several warned of heightening risks to Japan’s recovery that could warrant additional monetary easing, the minutes showed on Wednesday.

“Considering the difficulty in shifting inflation expectations, it was important to respond pre-emptively in the event of a change in economic and price developments,” one member was quoted as saying.

Daily Forecast

 

With monetary policy decisions by the Fed and the BOJ taking a backseat at this time, the main focus for investors will continue to be safe-haven protection. If U.S. stock markets continue to slide then look for the USD/JPY to decline further.

If U.S.-China trade relations resume on a positive path then stocks are likely to recover. This should trigger a rally in the Dollar/Yen.