USD/JPY Fundamental Daily Forecast – Reaction to 112.448 to 112.216 Will Set the Tone for the Day

The Dollar/Yen is trading slightly lower ahead of the U.S. opening and the release of the Fed monetary policy minutes from its September meeting at 1800 GMT. The main trend is up according to the daily charts, but momentum has been trending lower since last Friday.

At 1045 GMT, the USD/USD is trading 112.320, down 0.128 or -0.12%.

Forecast

The Forex pair is currently testing a short-term technical retracement zone at 112.448 to 112.216. Trader reaction to this zone will determine the direction of the Dollar/Yen today.

A sustained move over 112.448 will be bullish, setting up a potential challenge of the main top at 113.433.

A sustained move under 112.216 will signal the presence of sellers. This could trigger a further break into 111.749 then 111.463.

The USD/JPY is essentially following the direction of the U.S. Treasury markets which are relatively flat Wednesday. The yield on the benchmark 10-year Treasury Note is trading flat around 2.344 percent while the yield on the 30-year Treasury Bond was flat at 2.878 percent.

Investors are going to pore over the minutes Wednesday for any signs as to what the Federal Reserve may do before the end of the year, and what it currently thinks of the U.S. economy.

The Fed minutes are expected to show that inflation was the major topic of discussion. Fed Chair Janet Yellen in her press conference following the meeting noted that low inflation this year, despite a substantial improvement in labor market conditions, created uncertainty for monetary policymakers.

Near the end of her press conference, Yellen concluded that low inflation may be “transitory” and that it had not persisted long enough to negate the need for gradual policy tightening.

It should also be noted that several FOMC policymakers have indicated a preference for allowing inflation to pick up before raising interest rates any further.

We expect to see volatility with the release of the minutes. This is because it will have an impact on the U.S. Dollar.

Traders should also be on the lookout for an announcement from the White House regarding its choice for U.S. Federal Reserve chairman. The market thinks Trump is going to nominate a person who believes “low rates”. Traders should also watch for any fresh information on U.S. tax reform.