USD/JPY Fundamental Daily Forecast – Positive News Day Could Trigger Huge Rally Over 109.919

The Dollar/Yen continued to strengthen as North Korean fears subsided and investors prepared for a few days of key economic reports. Additionally, there is speculation that the dollar may strengthen in response to the announcement of President Trump’s long-awaited tax reform plan.

After successfully testing a key technical support area at 107.856 earlier in the week, the USD/JPY has turned around and is now in a position to challenge a key technical resistance level at 109.919. This is a potential trigger point for an acceleration to the upside with the next major upside target coming in at 110.944.

Essentially, trader reaction to 109.919 will determine the direction of the USD/JPY today.

Diminished concerns over North Korea may be getting the headlines, but I think the USD/JPY is being driven by rising U.S. Treasury yields. This is helping to widen the spread between U.S. Government Bonds and Japanese Government Bonds. This makes the U.S. Dollar a more attractive investment.

The U.S. 10-Year Treasury yield last stood at 2.148 percent. On Tuesday, the U.S. 10-Year Bond yield fell as low as 2.086 percent, its lowest level since November 10.

Later today, investors will get the opportunity to react to the announcement of President Trump’s long-awaited tax reform plan. If Trump’s message comes across as positive then the U.S. Dollar could surge against the Japanese Yen. The key to passing the law will be getting the Republicans and Democrats to compromise on key issues.

Traders will also get to respond to the latest report from ADP. Its Non-Farm Employment Change report is expected to show the private sector added 185K jobs in August.

The major report is quarterly Preliminary GDP. It is forecast to show the economy grew by 2.7%, up slightly from the previous 2.6%.

FOMC Member Jerome Powell is also scheduled to speak. Recently, he said below-target inflation is “kind of a mystery” since the labor market is tightening. He also said that weak inflation gives the Fed the “ability to be patient” regarding future rate hikes.

The tax reform discussion, a strong ADP number and a better-than-expected GDP report could be supportive for the U.S. Dollar. This would put pressure on the Japanese Yen.