USD/JPY Fundamental Daily Forecast – Should Rally if North Korean Meeting is Reinstated

The Dollar/Yen closed slightly better on Friday on light trading ahead of the long U.S. holiday weekend. Profit-taking after a steep three-day sell-off was also likely behind the move. The Forex pair posted an inside move which suggests investor indecision and impending volatility.

The USD/JPY settled at 109.385, down 0.134 or -0.12%.

A drop in U.S. Treasury yields supported the Dollar/Yen, but an easing of tensions over North Korean may have helped contribute to the Forex pair’s weakness.

U.S. Treasury yields declined on Friday and finished the week lower as investors continued to react to the U.S. Federal Reserve Monetary Policy Meeting Minutes, released on Wednesday, that signaled the central bank could allow inflation to run above its mandated target and renewed geopolitical fears pushed investors into safe-haven assets.

The yield on the benchmark 10-year U.S. Treasury note was lower at 2.931 percent, down 0.05 percent, while the yield on the 30-year U.S. Treasury bond was lower at 3.090 percent, down 0.041 percent.

President Trump sent the Dollar/Yen sharply lower last week when he surprisingly announced the cancellation of his June 12 meeting in Singapore with North Korean President Kim Jong Un.

Forecast

The price action on Friday may have been an indication that changes may be taking place behind the scenes over the North Korean situation.

Trump said on Friday that Washington was having “productive talks” with Pyongyang about reinstating the June 12 meeting, just a day after cancelling it.

Politico magazine reported that an advance team of 30 White House and State Department officials was preparing to leave for Singapore later this weekend.

Reuters also reported the team was scheduled to discuss the agenda and logistics for the summit with North Korean officials.

Trump further added in a Twitter post late on Friday:  “We are having very productive talks about reinstating the Summit which, if it does happen, will likely remain in Singapore on the same date, June 12^th, and if necessary, will be extended beyond that date.”

The USD/JPY should recapture much of last week’s loss if the U.S. announces the meeting with North Korea is back on and has been rescheduled. This news will likely drive investors out of safe haven assets while increasing appetite for risk.