USD/JPY Fundamental Weekly Forecast – Traders Anxious Over US-North Korea Meeting News

The Dollar/Yen closed lower last week in reaction to a drop in U.S. Treasury yields and renewed geopolitical tension.

The USD/JPY finished the week at 109.385, down 1.374 or -1.24%.

The dollar weakened against the Japanese Yen as U.S. government debt yields closed lower for the week after the Federal Reserve signaled it could allow inflation to run above its target and geopolitical fears pushed investors toward safer asset classes.

The Federal Reserve’s May meeting minutes released this week showed the central bank may be willing to let inflation run a little hotter that its two percent goal.

Investors also sold higher risk assets and moved money into the safe-haven Japanese Yen after President Trump expressed disappointment in the outcome of U.S. – China trade negotiations. Trump’s surprise cancellation of a meeting with North Korean leader Kim Jung Un also increased demand for the safe-haven asset.

Forecast

Geopolitics and economic data will be the biggest influences on the USD/JPY this week.

Reuters is reporting that American and North Korean officials met at the border between North and South Korea on Sunday in preparation for a possible North Korean-U.S. summit, as North Korea’s Kim Jong Un was cited as reaffirming his commitment to meet with U.S. President Donald Trump.

Both Pyongyang and Washington are pressing ahead on plans for a summit after Trump pulled out of the proposed June 12 meeting on Thursday, only to reconsider the decision the next day.

Trump also tweeted, “Our United States team has arrived in North Korea to make arrangements for the Summit between Kim Jong Un and myself. I truly believe North Korea has brilliant potential and will be a great economic and financial Nation one day. Kim Jong Un agrees with me on this. It will happen!”

The Dollar/Yen is likely to rebound if the meeting is reinstated. Investors who bought the Japanese Yen for safe haven reasons are likely to sell out of these positions if tensions over the matter ease.

After the initial reaction to the shift in geopolitical concerns, USD/JPY investors are likely to follow Treasury yields. They are likely to be sensitive to the U.S. economic data this week.

Monday is a U.S. holiday so there will be no trading. On Tuesday, investors will get the opportunity to react to the Conference Board’s Consumer Confidence report.

Wednesday will feature the ADP Non-Farm Employment Change report and Preliminary GDP.

The major report for the week is Friday’s U.S. Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show the economy added 190K jobs in May. The Unemployment Rate is expected to remain at 3.9%. Average Hourly Earnings are expected to rise 0.3%.

ISM Manufacturing PMI is expected to come in at 58.2, up slightly from 57.3.