USD/JPY Fundamental Daily Forecast – North Korea an Issue, but Bank Holidays Could Limit Movement

The Dollar/Yen is trading flat after recovering from early session weakness. Volume is light and volatility could be low due to bank holidays in Japan and the United States.

With U.S. and Japanese traders celebrating holidays, volume is expected to remain light on Monday but this may leave the market susceptible to increased volatility if there is any breaking news.

Additionally, there are no major economic reports until Wednesday when the Fed releases its latest monetary policy meeting minutes. In the meantime, geopolitical risks are expected to drive the price action. They tend to drive investors into safe haven assets like gold and the Japanese Yen.

More rhetoric from the U.S. and North Korea is driving the price action today with no real activity taking place over the week-end. North Korea’s leader said his nuclear weapons were a “powerful deterrent” that guaranteed its sovereignty, hours after U.S. President Donald Trump said “only one thing will work” in dealing with the isolated country.

Forecast

We’re looking for a possible two-sided trade on Monday. Although the USD/JPY reached its highest level since July 14 on Friday, prices have been essentially flat for almost two weeks. This could be an indication of impending volatility.

Earlier today, the Dollar/Yen traded lower in response to the North Korean news and a potentially bearish chart pattern. However, the lack of fresh selling triggered a short-covering rally that brought prices back to unchanged.

If the selling pressure does resume then 111.749 and 111.463 are the next key targets.

Strong buying could drive the market back up to last week’s high at 113.433. Overtaking this level could trigger an acceleration to the upside with 114.492 the next major target.