USD/JPY Fundamental Daily Forecast – Yen Attractive Asset for Worried Investors

The Dollar/Yen rebounded slightly on Monday as investors remained relatively calm, following last week’s volatile price action. Technical factors may have played a role in the price action since several indicators showed the Forex pair was oversold.

The USD/JPY settled at 111.292, up 0.044 or +0.04%.

The Forex pair is currently testing a key area on the daily chart that could determine the market’s next major move. This area is bounded by 111.236 and 110.495.

Holding above 111.236 will indicate the presence of buyers and falling below 110.495 will signal the return of sellers.

In economic news, Japan’s trade surplus narrowed to JPY 0.10 trillion in April, well below the estimate of JPY 0.25 billion.

There were no major U.S. economic reports on Monday and the numerous FOMC speakers offered nothing to help investors determine the timing of future interest rate hikes. There were also no indications that the current turbulence in Washington would have any influence on the Fed’s interest rate decision in June.

Forecast

There are several U.S. economic reports on Tuesday as well as more Fed speakers. The safe-haven Japanese Yen has become very attractive for traders worried about the political turmoil in Washington surrounding the presidency of Donald Trump.

Trump’s move from crisis to crisis has been very supportive for the USD/JPY. This price action is likely to continue as investors find out more about Trump’s reasoning behind the abrupt firing of FBI Director James Comey and his campaign’s alleged involvement with the Russians in the influencing of the presidential election.

It will be a busy day in the U.S. as far as economic activity is concerned. Early in the session, traders will get the opportunity to react to U.S. Flash Manufacturing PMI, Flash Services PMI, New Home Sales and the Richmond Manufacturing Index.

Several Fed members are also scheduled to speak.

Weaker economic data is not likely to prevent the Fed from raising rates in June, but it is likely to reduce the odds of numerous future Fed rate hikes. Investors will also be listening to the Fed speakers for clues as to the timing and number of future rate hikes.

There’s not much to do about the situation in Washington because former FBI Director James Comey is not scheduled to testify before the Senate Intelligence Committee until next week and the special prosecutor’s report won’t be released for months. Any breaking stories will be highly speculative.